Former executives of NationsWay Transport Service, Denver, are being sued by drivers who say they should be held personally responsible for unpaid wages and vacation pay, even though the company filed for Chapter 11 bankruptcy.
According to the Denver Post
, Jerry D. McMorris, former chief executive of NationsWay, and nine other former officers of the company, are being sued by former drivers of the company who allege the executives are personally liable under Colorado law for their unpaid wages and vacation pay.
NationsWay filed for federal bankruptcy protection in May 1999 after a series of layoffs, labor disputes and cost-cutting measures designed to allow the company to be more competitive. The bankruptcy petition prevents them from paying unpaid wages to employees, said James E. Scarboro, the attorney representing the officers.
Colorado law doesn't impose personal liability for those wages on a corporation's officers when that corporation is in bankruptcy proceedings, he said.
The judge presiding over the case, however, indicated that the burden truckers face must also be taken into consideration, reports the Post
"You have a great number of employees, who, as a result of bankruptcy laws, have worked and not been paid," he said
Evan Lipstein, who is representing the former drivers, argued that Colorado case law holds officers liable for wages when a company files Chapter 11 as a way of providing security for employees in the event of a corporate insolvency. Directors and officers have a choice where to apply corporate funds before a bankruptcy petition is filed, and in this case they chose not to put the money toward wages, he said.
NationsWay employed 3,500 people when it filed bankruptcy. Lipstein represents about 400 former employees, and hopes to take on 350 others in a similar action.
According to the Post, lawyers also debated a plan earlier this week for the company's reorganization under Chapter 11. Under that plan, the 3,500 workers would have to divide $2.4 million, which amounts to one or two days' back wages for each.