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The U.S. Bankruptcy Court for the Northern District of Georgia granted priority payment status for a portion of debt owed by a bankrupt staffing customer to its staffing firm — but only for wages from temporary workers, according to the May 2013 issue of the Legs & Regs Advisor, produced by Staffing Industry Analysts in conjunction with employment law firm Littler Mendelson.
The ruling does not establish a new legal bankruptcy law principle, but it is a departure from the mainstream of bankruptcy law, according to the Advisor. Mainstream bankruptcy law has rarely recognized the preferential “wages” character of any money owed to staffing firms.
This case is good news for staffing firms, because the usual theory is that what customers ultimately owe for staffing labor loses its priority character as wages when it becomes a corporate invoice issued to the customer, according to the Advisor. If this court’s approach becomes the dominant approach, staffing firms will become better able to help their customers through the bankruptcy process. However, one case in a field as fact-dependent as bankruptcy law does not create a sea change.
To read the full May issue of the Legs and Regs Advisor, click here.