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Legs & Regs: Bankruptcy ruling is noteworthy for staffing

May 16 2013

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.

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Filcro

Tony Filson 12/02/2013 03:55 pm

With any temporary firm paying a company's employee's wages and their associated Federal, State and City taxes to be so compelled to pay these obligations out of their own pocket is insanity. If a class of non-exempt employees' wages and taxes would not attached by the receiver; what could compel a court to force an outside entity to meet the TAX and WAGE obligations of the LAW FIRM itself filing for bankruptcy? The U.S. Bankruptcy Court for the Northern District of Georgia was right in their ruling as it would be cruel and unusual for a tiny 3 person temp staffing firm to be compelled to pay the taxes and wages of a multi-billion dollar law firm. BRAVO Georgia! Judicial brilliance, common sense and humanity. Perhaps the rest of the country will follow your lead. BRAVO!!!


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