steinway child services shuts down

Unpaid wages at Queens, New York nonprofit leaves employees holding the bag. In the article we propose a better solution to fix the increasing problem.

Another Employer Leaves its Workers Holding the Bag

A Queens, NY-based non-profit closed its doors this week, leaving its employees to hold the bag on unpaid wages it has owed them for months.

Meanwhile, the non-profit’s CEO was making $192,385 in salary, according to the organizations recent tax filings, reports the New York Daily News.

The non-profit, which is still advertising job openings and soliciting donations on its website, Steinway Child and Family Services shuttered after it failed to pay more than $7 million in state and federal payroll taxes.

The organization served children with severe mental health issues in Queens, New York. But, according to employees like Gladys White, “it was a job from hell”, reports the New York Daily News, “they still owe me three paychecks.” In addition, employees at the non-profit had to endure, according to the New York Daily News, repeated furloughs where they were simply not getting paid.

Empty Judgments in New York: a Big Problem

Employer bankruptcy is becoming a huge problem in New York. It’s called “empty judgments”, and it means that even if an employee successfully sues his employer for unpaid wages, the employee may still not get paid, even though it has a court-ordered enforceable judgment against the employer.

As the article, Empty Judgments: New York’s Wage Collection Crisis notes,

“In the years it takes to get a court judgment, employers transfer money from their bank accounts, put property in the names of family members, close down their business or change its name, create sham corporations, ignore court orders, or leave the country with their property. Unlike other states, New York law does not provide adequate protection against these tactics. As a result, many workers never get paid the wages they earned, even when they engage in a lengthy legal process.”

 

An example from that article shows that many popular chains are shameless in their tactics to avoid paying worker wages when the close their doors. For example,

“Four months after three workers filed a lawsuit in federal court against the new owners of Saigon Grill Restaurant in Manhattan’s Upper West Side, the owners shut down the restaurant and never showed their face in court. In May 2013, the court awarded the workers close to $181,000 in a default judgment for the defendants’ labor law violations. Collection efforts thus far have been unsuccessful and the workers are now in bankruptcy court against the largest shareholder who reported in his bankruptcy filings that he owned 80% of the corporation, yet has also denied having any actual financial investment in the company.”

How to Fix the Problem

While New York courts do provide a tool to “attach” or hold on to assets of an employer who is being sued by employees for unpaid wages, the burden to prove that an “attachment” is necessary is extremely high. The employees must show that “an employer has acted, or is about to act, with “fraudulent intent” to avoid a potential judgment.”As the article points out, “even when presented with clear evidence of rapidly depleted bank accounts and suspicious transfers of property, as the workers’ stories show, courts generally avoid finding an intent to defraud and instead attribute possible non-fraudulent motives to explain the transfers of assets.”

A better solution is:

  • to permit an employee to “attach” the assets of an employer by proving to the court that she is “likely to succeed on the merits of the case”,
  • require an employer to put up a bond in order to appear before the court to defend itself.

Otherwise, the employer can appear to defend itself in court, but at the end of the case, run out of money in legal fees, leaving the employee pennyless for his or her efforts.

 

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