A friend of mine works at a small company, maybe around 50 employees. The company has repeatedly had insufficient funds in the bank to cover the employees' salaries, resulting in several of her paychecks bouncing. She gets paid eventually, but obviously this is a pretty big inconvenience. Once they even wrote the wrong date on her check, so that it could not be cashed on her proper pay date.

She has complained to the CFO and the owner of the company, both of whom simply did not care or even acted annoyed that she had brought this problem to their attention.

What should she do? Is there any sort of legal protection (in the US, state of Ohio) that protects against this sort of behaviour? It has happened at least four times in the past year.

  • 1
    This site has some information on wage laws in Ohio.
    – Adam V
    Jan 18, 2016 at 22:57
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    @HLGEM: According to this page: bankrate.com/finance/personal-finance/… Workers pay (upto $10,000 earned in the last 180 days) have a priority claim. Jan 19, 2016 at 0:06
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    Rule #1: Don't mess with my paycheck. One NSF would be enough for me to head for the hills. Jan 20, 2016 at 17:21
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    Gosh that's arrogant. Acting as if her bounced paycheck is a petty inconvenience. Jan 20, 2016 at 20:45
  • 6
    Look for a new job before you go find a note on the door that the company has gone under.
    – Tim
    Jan 21, 2016 at 12:31

7 Answers 7


They acted annoyed when they are writing the bad check?

Here is a trick. Open an account at the same bank as the employer, even if just a savings account. Deposit into that account. At the time you deposit, they will check if funds are available and, if so, will put a hold on those funds. If funds are not available, they will tell you. You go to the front of the line.

If you go to your (different) bank the check will just go in the queue. When it comes time to clear at the end of the day, a bank will clear all checks on their own bank first. If it does not clear, it takes 2-3 days to get back to your bank, and some banks even charge you for a check not clearing. Your bank will typically not automatically re-run the check. Some shady employers will even go with an out-of-state bank to prevent this - if so, run.

Get your resume out and start looking for job with a solvent company.

Writing a bad check in most situations is a criminal offense. You have the option of going to the police but they are going to know who filed charges and may make things uncomfortable for you or even fire you.

If your state has a labor commission, go to them. They typically take this seriously and will act anonymously. I worked contract for a sourcing agency that had a policy that we did not get paid until they did (and customers would be 30-90 days out). Someone reported them and the labor commission stepped in and we got paid for work performed immediately. Twice I have worked for out of state start ups that went under; my state labor commission got me paid.

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    There is the option of complaining to the department of labor. I'd say document everything and file a complaint. The department of labor will get you your pay plus interest and whatnot. They will probably also start an investigation of this employer to see what other laws they may be violating. Jan 19, 2016 at 2:31
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    "Some shady employers will even go with an out state bank to prevent this - if so RUN" - Actually, if your payheck is bouncing, and especially if it has bounced more than once, RUN. Regardless of where their bank is.
    – aroth
    Jan 19, 2016 at 4:12
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    @jpmc26 Cashed, but I guess I've been programming computers for too long :)
    – Edwin Buck
    Jan 19, 2016 at 23:41
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    Racing all of the other employees to the bank to get yours before the money runs out isn't really a solution to the underlying problem, especially if other employees start figuring out this "trick". I was in this situation twice in crummy college jobs, and in both cases all the checks bounced.
    – Comintern
    Jan 20, 2016 at 23:49
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    @jwg I agree. This is easily my worst answer with more than 100 up votes.
    – paparazzo
    Jan 21, 2016 at 16:48

What should she do? Answer is first and foremost LOOK FOR A NEW JOB. This employer has all the signs of about to fail, in which case she might be owed back pay that is difficult if not impossible to collect.

What she should do second is assess the risk on an ongoing basis. Eg. if her weekly salary is $1000 for example, and she thinks that she's only 75% likely to get paid next time, she needs to ask herself whether she's willing to remain in the job being paid only $750, or whether her time might be better spent doing something else.

Could she file for unemployment successfully if paychecks bounce repeatedly? Seems like constructive dismissal to me.

  • 7
    Check with the state Labor Department but indeed in some states failure to pay employees entitles them to unemployment. If you are not paid after all, you are not employed. Note go this route only if you are definitely leaving as it will burn bridges with the current employer as they get stuck for their portion of the unemployment.
    – HLGEM
    Jan 18, 2016 at 22:14
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    I think the assessment part is wrong. If she's only 75% likely to get paid, then that means she either gets $0 or $1000; there is no in between. So the question is whether she's willing to remain in the job if she doesn't get paid at all. Given that this has happened multiple times, I'd say the likelihood of her ending up with no job and no last paycheck is really high.
    – NotMe
    Jan 19, 2016 at 15:08
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    @NotMe: Mathematically, "expectation" is very well defined, and the "expectation" of (75% * 1000 + 25% * 0) is indeed 750. If you've got a big enough emergency fund, you can treat this as a non-insured risk. If not, I agree that you will have to treat this as an actual financial crisis.
    – MSalters
    Jan 19, 2016 at 20:03
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    @MSalters: Using correct math for incorrect use cases is still incorrect. This isn't a repeatable experiment like flipping a coin. Either they keep paying, than it's 100% or they stop paying, so that you'll lose $1000 once.
    – Chris
    Jan 20, 2016 at 15:01
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    @Chris: Term life insurance is even less repeatable: either I die or I don't. Yet the math of expected value is applicable and determines the premium. I can see your point about repeatability, but that's actually a subtle difference. I'm talking about the expectation of the next check, you're talking about the expectation of the series. Since the chances aren't independent (not even close), you can't derive the expectation of the series from the expectation of the next single check..
    – MSalters
    Jan 20, 2016 at 16:20

I don't know if legal protections exist for this sort of thing but I'd definitely consider 4 instances of this a sign that the company is not doing well (and / or leadership is shifty) and I'd start looking for a better job.

A company that pays late either has no money (which puts the stability / longevity of the company in question) or its officers are playing games with their employees (which is ethically questionable).

If the owner / CFO aren't concerned with one of their most basic obligations, I wonder how they treat their employees and their clients - if this happened once in a long while, that would be a mistake. If it happens 25% of the time and company officers didn't treat this a high-priority problem (and discuss it openly), I would think that's not a good sign.

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    I'd consider one instance enough if they acted annoyed that I mentioned the subject.
    – HLGEM
    Jan 18, 2016 at 22:15
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    @HLGEM The only reason I didn't write that is because annoyance when asked about a single instance could be due to other (unrelated) things and not directed towards the asker. When it happens more than once, that's a pattern.
    – xxbbcc
    Jan 18, 2016 at 22:44
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    "A company that pays late ..." And this is a particularly bad way of paying late. A company that says, "our cashflow is stuffed this month, here's why, here are the main risks to the company's future, here's what we're doing to improve matters, and here's the date on which you'll be paid late" has at least given you some information on which to judge whether to continue with them -- startups can have some rocky patches while raising investment, for example. A company that tells you nothing and writes bad cheques doesn't even let you take a knowing risk. Jan 19, 2016 at 10:24
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    @Steve Agreed. Also the startups I know didn't have 50 employees until the cashflow was reasonably secured. And if they run out of money that late in the game, it's probably a much worse sign than when it happens at the start.
    – Voo
    Jan 19, 2016 at 21:57
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    I would think that's not a good sign. I think this might be the largest understatement I've seen in an SE answer.
    – reirab
    Jan 20, 2016 at 1:38

I had exactly this situation, also in Ohio. Yes, there are laws requiring a company to pay its employees the promised salary. But if the company doesn't have the money, the law can't make the cash appear out of nowhere. If the owner is trying to pull millions of dollars out of the company while not paying the employees, you can bring lawsuits and get government regulatory agencies involved and force him to hand over the money. But if the company is going broke and the money isn't there, then it just isn't there.

If the company goes bankrupt, employees are near the front of the line. As I recall the government comes first -- unpaid taxes etc. I think creditors with secured assets are number 2 and employees are number 3. Something like that.

Realistically, you have to decide if you're willing to take the risk. The safe thing to do is to find another job with a more stable company. If you stick around and the company survives and prospers, there may be rewards.

In my case, I was willing to take the risk but my wife wasn't, so I got another job. I did some consulting work for them on the side after I left. The company did eventually declare bankruptcy and I got letters from the court for years about the progress of the bankruptcy proceedings, but I never got the money they owed me.

The moral of the story being: If a paycheck bounces once, that might just be a mistake or some special hard case. But if bouncing paychecks become a regular thing, you can't count on ever getting the money owed you. Decide how you want to deal with that.

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    On the other hand, "there may be rewards" is a bit of a thin hope, and the rest of their attitude certainly implies they regard employees as a replaceable resource to be exploited rather than people to be valued for their skills... Jan 19, 2016 at 6:12
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    In the queue of 1) government, 2) secured creditors, 3) employees, 4) other unsecured creditors, I personally think that puts employees near the back of the line, not near the front. You may or may not be able to check your employer's finances, but I've experienced the same order of priority here in the UK, and it is not difficult for a company to arrange its funding such that secured creditors greatly exceed the likely assets that would be raised from a liquidation, leaving nothing for employees. If you had VC funding, likely they will have done their best to arrange this. Jan 19, 2016 at 10:28
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    "may be rewards"? incredibly unlikely UNLESS the company has discussed this with the employees before hand. Even then it's a matter of them being honest, open and up front with everything that's going on - which they area apparently not doing. Summary: there won't be any rewards regardless of how it plays out.
    – NotMe
    Jan 19, 2016 at 15:11
  • I was thinking "may be rewards" in the sense that you could be one of the dedicated few who pull the company through this difficult time, and management may appreciate your sacrifices. And with many people leaving, it is likely their are opportunities for advancement. Is there a lot to hang your hat on there? No.
    – Jay
    Jan 19, 2016 at 15:18
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    @Jay: or maybe in your case the company just didn't have many/any secured creditors, I suppose it comes down to how it was funded in the first place. In my case it had loads of secured debt, but on the plus side the UK has a government fund for bailing out the employees of insolvent companies, so I got much of my owed pay (and some pay in lieu of notice) from that instead. Jan 19, 2016 at 16:10

Indeed there is legal protection--a lot of it. Start by looking here: Fact Sheet - Wage and Hour Division. Of course, as other people have said, finding a new job would be a very good idea. These guys are probably in serious financial difficulty if they are bouncing paychecks.


Many (if not most) states have a labor board and specific laws regarding when you must be paid. (Since you don't specify what state you're in, you can do a search for "[State Name] labor laws" and it should take you to a page that'll inform you what the specific laws are for your area, and how to file a wage claim if those laws haven't been met.)

Alternatively, your friend can go to her boss and say something along the lines of:

I'm concerned that our bouncing paychecks may be causing us to fall afoul of State Wage Law 123.456, where it says we must be paid by the XXth. If our paychecks bounce, the [State] labor board says that's a potential wage claim, where we'd owe not only the wages, but we'd also have to pay a fine and reimburse any fees the employees got as a result.

Note the last part will depend on what you find for your state.

  • 7
    You cannot get blood out of a stone. If the company is on the verge of being bankrupt then whatever the law says you get nothing. The pot is empty. Best bet go
    – Ed Heal
    Jan 18, 2016 at 21:55
  • @EdHeal - that's true; my answer assumes that the friend wants to stay at the company if she'd get paid on time, and that the company has the money available, but is merely being lazy about their responsibilities. If both of those are true, addressing it from the standpoint of "you need to take this seriously, there are fines involved if anyone wises up" stands a chance of getting the company to be more proactive. (If the friend doesn't care about staying, I'd still suggest she file the complaint with the labor board while on her way out the door, in case it gets her fees refunded.)
    – Adam V
    Jan 18, 2016 at 22:56
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    @EdHeal: I know a guy whose boss was always late paying. And then the bosses wife turned up in a brand new Ferrari. He doesn't work there anymore.
    – gnasher729
    Jan 19, 2016 at 0:20
  • @EdHeal OP cannot, indeed, get blood from stone, but a court can and if a company owes OP (or OP's friend) money then just sue -- everything in the US can be resolved through a lawsuit.
    – cat
    Jan 19, 2016 at 0:58
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    @EdHeal: if there's literally no money then it'll all be over in a month or so, one way or the other. If there isn't literally no money, actually there's some money, then the matter of stones and blood doesn't apply. What you can potentially get blood out of, is something that has some blood but not enough blood to cover all its obligations. Or something that has no blood, but whose directors could be held responsible due to their negligence or malfeasance, and therefore who are highly motivated to provide some. So it's not best to just go, it's best to try to get your money and go. Jan 19, 2016 at 10:35

Check kiting is a criminal offense in most jurisdictions. If they keep writing checks, bouncing them and acting like they don't care, criminal charges may be in order. Talk to local law enforcement to see what you can do. Note: I am not an attorney or a law enforcement officer...

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