A couple of days ago, Florida-based turboprop operator Silver Airways ceased operations, months after it filed for Chapter 11 bankruptcy protection. While the company initially claimed it would emerge stronger than ever before, in the end, the carrier was liquidated, and its limited assets were sold to another party at a low cost.
Continue reading: Silver Airways Not Paying Employees What They’re Owed, Offers 45%
Share your questions, experiences, and thoughts below.
Who or what is "Wexford"? Where do they live, and perhaps more importantly, where are they keeping their newly-acquired airplanes parked? Some Ukrainians I know might be interested in providing a drone-flight demonstration...
Yes and no. If we're talking 45% of a month's pay, it's unfortunate but it can happen, in the same way that you can prepay, in part or in full, for something (e.g. a custom made sofa or a seat for a plane/train journey) and not receive it because the company selling it happens to go bust between undertaking the contractual commitment and delivering the product or service.
If this involves arrears from previous months, I agree it's wrong and regulators should have ways of monitoring that sort of thing and going after employers disadvantaging their employees while getting an unfair cashflow advantage on their competitors.
I don't think enough people realize how fragile most industries balance sheets really are. Not being paid what you're owed isn't fair at all. Hopefully they can recoup this somehow.
Insurance companies, like United Healthcare, does this to medical offices all the time. That is why hospitals and private equity are buying up practices because those entities know how to fight back a little better.
When I worked in a union job, our employer was required to keep a bond that would cover a weeks pay (we were paid weekly) for exactly this reason
I suspect that the airline spent down its final reserves to maintain the "going concern" that they believed Wexford was going to purchase and assume the company's liabilities, including employee pay. If they had shut down earlier the employees would have moved on, albeit fully paid. But there would be no going concern for Wexford to assume, and no ongoing opportunity for continued employment. In the end, if the airline is to be believed, Wexford decided they only wanted the equipment. Bankrupcy courts are all about spreading "unfairness" in an equitable manner.
@Lucky - I see it a little different.
They ran out of money and paid what they could.
Employees would naturally ask why? And I think they explained why - They counted on Wexford to fund the company.
Clearly mgmt are a bunch of fools and Wexford was savvy. (Not moral or ethical, but they purchased assets.) Mgmt should have never agreed to the asset sale.
I do agree with your idea that payroll should be fully funded. Perhaps even funded +1 pay period in a separate account so all employees get paid.
But, it is what it is. There is not enough money to pay payroll 100% so they did what they could.
In French law when a company bankrupts you must first pay employees what they're owed and other creditors only come afterwards. Isn't it the same in the US? And if so, couldn't Silver pay employees by selling it's aircrafts?
Hey.....MIA305 ! .., I got an inside scope on a 'bridge' I need to sell. 'Must move', it's a downright 'steal' !! BUT WAIT !! I'll only offer to you right now, so it's our secret but Ya gotta act fast !
... lol.... it's already been done, but I don't think it's going to matter. He'll be spending a lotta time behind bars !
Sadly, that's capitalism for yah. Interesting how the big boyz n' girls can usually make a killing on the backs of the working grunts & consumers ......And don't expect ANY sympathy from our current administration.....
Until these scumbags spend hard time behind bars (and not at a 'Club Fed' all-inclusive resort) maybe there would be a tad more 'justice'.
Apparently the French, as indicated above, have their priorities straight & unions/grunts have a bit more influence. Of course the downside is more frequent labor disruptions, but I think albeit momentarily frustrating it's for the greater good of a healthy society as a whole.
I think you'd see some 'grateful' ex-Silver staff watching that " demo " !!
....lol
I'm not a lawyer, so read this with a little skepticism. US Bankrupcy Court tries to create a plan to divide any remaining assets among the multiple parties having claims for payment against the corporation. Secured creditors have existing specific claims (liens) against certain company assets. These creditors tend to be prioritized by the court when liquidating those certain assets, though few, if any, get 100%. Unsecured creditors have a lower priority, and its likely the employees are in this group. My expectation is that the aircraft and any other valuable hardware had existing liens. And of course, the payments to the lawyers handling the bankrupcy are protected against loss. So it's not unusual after the division of assets for unsecured creditors to get 0 - 10% of what's owed to them. By that yardstick 45% isn't terrible. Of course, I'd be angry if I was an emplyee.
Not a lawyer but believe the US fair labor standards act may allow the employees to go after the company’s directors (personal liability) for unpaid wages.
I am a lawyer and can confirm you are on the right track. Bankruptcy is all about priorities, and secured creditors are paid first. You are probably right that there are liens against most hard assets, making it hard to sell them to pay employees.
While unpaid wages are an unsecured debt, they receive priority over other unsecured debts, which is likely why they are getting as much as they are. I’d imagine other unsecured creditors are getting zero or close to it (and shareholders are certainly getting nothing).
I wish I could say more, but I was involved with a deal where Wexford was a bidder. Let's just say NO ONE at the company (or our rivals) wanted Wexford involved.
Mark, you actually got it quite right. I've been involved with the bankruptcy field, transportation in particular, for many years. That said, I've never stiffed employees paychecks. Bad juju there.
Except, lawyers' fees for the bankruptcy aren't exactly protected. We've certainly lost our asses on many cases over the years. In others we've waited 3 years or more to get paid. We also had a case where we were the second firm in, with the judge dismissing the first firm, and clawing back every cent paid to them.
and yes, 10% or less is typical recovery in a Chapter 11. If it were my case, however, I would have paid the employees first, secureds next. I've never had a judge object to it, especially when paying non-management employees. More often than not, I've had judges make special allowances for employee pay and benefits.
At the same time, we were always honest and up-front with the employees about the actual financial condition of the company and where things stood. Sometimes we've increased pay during the bankruptcy to encourage employees to stay despite the uncertainty. BUT, I always made sure they got paid.
I once worked for a company which went bankrupt on the 28th of the month.
In the last few days managers pointed out that because the monthly payroll always ran on the 20th, we had been paid for our time until the 30th so we should show up!
Depending on the price and circumstances, the right to collect bridge tolls may mean that such a deal can be quite attractive.
It all gets down to the pay cycle of the employer. My company paid all employees every two weeks. Therefore, if things went south, the hit was minimal. Based on what I'm reading, looks like Silver paid monthly which puts employees in harms way.
If I was a union member in an airline (pilots, FA, mechanic, ground support, dispatch, etc) or any other business, I would insist my union move us to a two week pay cycle. Management will moan & groan & cry about cashflow; but those in the C-Suite are the ones to give themselves a departing bonus (Silicon Valley Bank) just prior to declaring bankruptcy while the rest got squat.
You do know that SVB went down because brainwashed idiots performed a simultaneous attack on the bank.
It can happen to EVERY bank. That's our banking system. That's Capitalism.
When a company goes into liquidation or fire sale of assets wages due become unsecured creditor claims. Often out of morality companies pay final wages, sometimes getting court approval to do so. Looks like in this case morality got thrown out the door.
And no one is going to mention the losses by employees and contractors from the multiple Trump bankruptcies?
LOL... How paradoxical..,.., "moral" & "company" or "corporate" in the same sentence !1
LOL... I'll take that as you're an interested party... How much are ya offering ?
Eskimo is wrong.
Silicon Valley Bank failed because it bought long-term bonds with short-term deposits, and the bonds lost value as interest rates rose, so it could not sell the bonds to repay deposits.
They hired an unskilled nepotism risk manager.
What do you mean "It shouldn't be allowed"?
The company doesn't have the money and the employees aren't the only ones being stiffed.
The vastly more important question is how did this company get $500 million in debt, thereby assuring no one would by them as a going concern. Heck! Hawaiian Airlines had $1.9 billion in debt when Alaska Airlines bought it, which is roughly the same debt to revenue ratio as Silver, but Hawaiian had millions of dollars in assets, while Silver had basically nothing.
When a company goes into bankruptcy, every penny it spends is subject to court oversight under the law. The are no decisions made based on "morality."
For every employee who might get paid there is a supplier who does not.
You know. You absolutely know that management salaries weren't paid out at pennies on the dollar.