Collecting Back Wages from Shaky Company

[lindenforest]

The New Jersey company is a start-up with minimal capitalization. It does have a high-tech patent portfolio and valuable product prototypes. It has received start-up funding through a small number of investors, who serve as its Board. It has been on the verge of receiving major venture funding, in one instance, and, in another, purchase by a publicly traded corporation. In both cases, the deals fell through at the last minute. The problem is wages owed to an employee. One amount, around $10K, represents wages (bonus and pay increase) which were "in error" never paid for 2003. The remaining and significant amount is stipulated in contractual agreements for 2004 and 2005 and never paid because of the company's cash flow deficiencies. The employee was, in effect, working without being paid salary due. At this point, the company apparently has no means of paying these wages. However, the assets -- patents and prototypes -- are valuable and might potentially, in the future, be sold. Questions: What are the employee's claims on the company? Should the employee consult an attorney to press claims? Is there something like putting a lien on a company such as you would put on a piece of property so that you would get paid if the property is sold? Any advice appreciated.

[CurtJ.]

you would collect unpaid wages through the state's DOL Wage and Hour Division, or you could bring a private suit under the Wage and Hour laws. Most go through the Wage and Hour division as its free and they do the work, albeit with less enthusiasm. Plus, they have the weight of the state behind them. You should pursue this most likely. However, regarding patents and licenses, they are "lienable" so to speak. What I mean is that they are an asset and all assets can be seized, and/or sold, to recover a judgment. You have to get a judgment first. Its just like a home or a car, although likely more ocmplicated. Whether the DOL wage and hour is savvy enough to do this is unknown, which is why you might want to bring a private suit, get a judgment, and go after the assets.

mind you, just cuz its an asset doesn't mean you'll get it. That is, like any asset, it may be encumbered somehow. Think of a mortgage upon a house. The first mortgage holder is satisfied before the second, and so on. if these assets are somehow encumbered, and you're number 4 in line, then it might ot be worth it. finally, understand that encumbered means some sort of legal encumberance, not just general debts. judgment holders take before general creditors, but after secured lienholders. or along those lines.

curt j.

[lindenforest]

Thanks, Curt J. It looks as if recoveries through the state are limited to $10K, and we're talking about over $100K total. Right now the principals of this small company are claiming their pockets are empty, but, again, I'm thinking there may be some value to the patents, possibly down the road. But then again, maybe not. If another company wants to steal their technology, how does a small company with no money to litigate defend its patent rights? I'm wondering if there is a way to find out if the company has any other assets. The employee due this money has been pretty well kept in the dark re: financials.