New York Employment Law, Defense Attorneys

Choosing a Nuclear Option – A Matter of Survival

Over the past few years, a proliferation of wage and hour litigation has put companies large and small on guard and has underscored the importance of proper payroll practices and recordkeeping.  

Many small enterprises, especially restaurants, have significant exposure to employment violations, such as unpaid minimum wages, overtime pay, tip credit issues, etc. On top of the violations’ risk, many plaintiffs’ attorneys frequently seek to turn wage cases into class actions, bringing every similarly situated employee who has worked for the business for many years into the case to assert a claim.

An apt example is the class action lawsuit filed against celebrity chef, Geoffrey Zakarian and his management firm. Last week the New York Times reported, “He has filed for personal bankruptcy, a move that could help fend off more than $1 million in legal claims from his kitchen staff at Country in the Carlton Hotel, along with a former partner in the restaurant, which closed nearly three years ago. “

Mr. Zakarian’s defense strategy is also representative of the course of action many other small business owners are taking, when they find themselves in similar situations.

In the current economic climate, we are seeing more and more restaurant owners simply throwing in the towel. By going out of business, they make it impossible for the plaintiffs to recover any money from the corporate entity and filing for personal bankruptcy discharges the individual liability, making it impossible for the plaintiffs to recover any money from the individual owners. 

As employment defense attorneys, we sometimes refer to going out of business and filing for personal bankruptcy as “the nuclear option.” For obvious reasons, it is not an ideal choice; nonetheless, we see a growing number of business owners, like Mr. Zakarian, who choose to go “nuclear” in the face of expensive employee litigation.

If an employment lawsuit is filed against your business, you are dealing with a wage and hour investigation or need legal help to avoid costly and distracting employment disputes, call us at (718) 275-6700 or email us to arrange a consultation to find out how our attorneys can help protect your legal rights.

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