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.
The saddest part of this situation is for employees — not just for the fact that they don’t have a job, but also for the fact that they’re not even being paid all the money they’re owed.
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Silver Airways will only pay employees 45% of last pay period
Enilria reports how Silver Airways has just sent out its final paychecks to employees, but it’s not for the amount they were expecting. In a memo attached to the paycheck, employees have been informed that they’re only being paid for 45% of their last pay period. Here’s the memo, which is quite something:
It is expected that you are frustrated and angry with receiving only a partial paycheck today. It was roughly 45% of what was expected and if more receipts come in from recent flying, we will ask the court’s permission to pay additional amounts to our Team Members.
Words cannot express our collective frustration and disappointment. We thought we had found a solution for our company and our Team Members’ future with Wexford after many other failed transactions. It was a transaction that our board and I had hoped would save hundreds of jobs.
Nevertheless, despite statements by Wexford’s representatives in court that Wexford would pay for Silver’s operations after close and work out arrangements with airports and aircraft lessors, this did not occur. Wexford, with knowledge that its actions would shutter the company, walked away at the last minute. Wexford determined to purchase only the assets of the company and not the going concern (operations and employees).
As a result of Wexford’s actions, the company was left with limited cash. We did not know or expect Wexford was walking away until Tuesday, and we tried everything possible to bring them back. We exhausted all efforts to try and salvage the company.
Cash on hand at the time of the shutdown was used for a partial payroll and June medical insurance coverage.
We have reached out to a number of airlines to ask them to provide preferential treatment of our employees if they have employment vacancies and the response has been encouraging.
Your efforts and hard work are not ignored and are the reason we survived for many years with very limited resources. Thank you and apologies.
This feels like it shouldn’t be allowed
To state the obvious, I think it’s super wrong that Silver Airways employees are being treated this way. They showed up to work expecting to be paid a certain amount, and now they’re being told that they’ll get less than half of what they’re owed.
I’d assume that most frontline Silver Airways staff aren’t exactly rolling in dough, and are relying on this pay check to cover their basic living expenses. Never mind that they’re out of a job going forward, but they’re not even being paid for the work they have already performed.
Look, I can kind of see how this happened, but that doesn’t mean it’s okay. Silver Airways ceased operations because it ran out of money, so I can see how there wouldn’t be enough money in the account to actually pay employees.
But my gosh, it sure seems like paying employees what they’re owed should be part of any deal, and for that matter, company executives should be required to keep enough cash on hand to pay employees for the work they’ve already performed, beyond what creditors are owed… no?
The tone of this memo is interesting. On the one hand, it comes across as apologetic and sympathetic toward employees. On the other hand, it tries to completely shift the blame, almost as if management is a third party that has nothing to do with why employees aren’t being paid. I’m not really inclined to give Silver Airways management the benefit of the doubt, given the company’s shady financial history.
Bottom line
Silver Airways has just liquidated. That’s sad, because it means a lot of people are out of a job. Even worse, the company’s employees aren’t even being fully compensated for the work they’ve performed, with employees just getting 45% of what they expected for their last pay cycle.
No matter how you slice it, that’s not okay… right?
And no one is going to mention the losses by employees and contractors from the multiple Trump bankruptcies?
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.
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...
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.
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!
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.
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.
They didn’t pay 45%. They paid less!
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...
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.
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?
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...
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.
Bankruptcy is the "American" corporate way !
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...
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).
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...
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.
@bossa… not just the American way, it’s positively Presidential! Yugely!
And in Europe there is redundancy legislation. The US has few employee rights
@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...
@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.
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 !
Depending on the price and circumstances, the right to collect bridge tolls may mean that such a deal can be quite attractive.
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...
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.
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
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.
If only someone would...nevermind
... 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 !
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.
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,...
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.
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...
I think you'd see some 'grateful' ex-Silver staff watching that " demo " !!
....lol