Silicon Valley Bank and Its Effects on Employee Paychecks
The collapse of Silicon Valley Bank (SVB) earlier this month has already made big waves in the California economy. Many corporations, especially startup tech companies, kept substantial assets at the firm. As a result of the collapse, many of these companies are not paying their employees. Countless tech workers have already reported that their paychecks have been delayed or canceled. And many companies have already fired some of their employees due to the collapse of SVB.
What Exactly Happened to SVB?
SVB’s troubles began because it had a high number of government bonds. Over the past year, the US Federal Reserve has been raising its federal fund’s interest rate. As the interest rate increases, the price of bonds decreases, reducing their value. SVB had about $91 billion in bonds. When those began to lose value, it had to sell off about $21 billion in bonds at a low price, causing them to lose several billion dollars. SVB tried to raise more money by announcing a stock sale, but its stock price rapidly dropped. As the price dropped more, other creditors began to panic and withdraw their money. This rapidly caused the bank to lose its remaining funds and collapse.
The Effects Of SVB’s Collapse on Employers and Employees
When SVB collapsed, it caused a huge shock to the financial system. Any corporations that still had deposits in the bank lost access to their deposits. While the federal government guarantees the value of some deposits through the Federal Deposit Insurance Corporation (FDIC), it only covers deposits up to $250,000. That means that countless companies lost millions of dollars overnight. As money evaporated, payroll departments had to stop issuing employee paychecks, causing countless Americans to lose out on their much-needed pay. In other cases, companies that had suddenly lost their savings had to quickly lay off employees to cut costs.
Viewing SVB’s Collapse Through the Lens of Employment Law
What options and rights does an employee have in these situations? One way to understand the answer to this question is by looking at employer obligations.
Under the Fair Labor Standards Act (FLSA), employers are required to pay employees at least minimum wage for all hours worked and must compensate employees for any overtime worked. Failure to pay wages on time can result in penalties, including liquidated damages and attorneys’ fees.
State law imposes additional responsibilities on your employer. California Labor Code Section 204 requires employers to pay all executive, administrative, and professional employees at least once a month. In addition, that section obligates employers to pay workers “not more than seven calendar days” after the end of a pay period. That said, the law allows certain exceptions. Employers might be able to get themselves off the hook if they claim that their failure to pay the employee was an “isolated” or “unintentional” error. An investigator may also consider whether your employer is complying with a “set of policies, procedures, and practices” that fully coheres with California law. Finally, another section of the California Labor Code states that employers are exempt from financial penalties if they can show that their violation of California law was not willful.
Those defenses suggest that there may be some difficulty in filing a claim against your employer for not paying you a paycheck. For instance, there might be a situation where your employer failed to pay you because it had no money in its non-SVB bank accounts to pay you. On the other hand, your employer cannot simply use the SVB collapse as an excuse for failing to pay your wages. Ultimately, you’ll want to consult with a qualified attorney to see whether your employer is liable for violating California’s Labor Code.
Reach Out to Us Today to Discuss Your Options
SVB’s collapse will certainly lead to employment law issues throughout California and the country. If an employer fails or refuses to issue your paycheck, you might have a legal claim to recover what is rightfully yours. You may also be able to file an administrative complaint with the Department of Labor or a state agency. The best way to learn more about your legal options is to consult with an attorney and share your story.
Bibiyan Law Group, P.C., is a dedicated group of California employment law attorneys. We are passionate about obtaining outstanding results for mistreated employees. We know that employers often try to play games with their employees’ lives and careers. But we’re ready to stand up for your rights and get you the treatment you deserve. We’ve obtained tens of millions of dollars for our clients over the years. And we’re ready for you to be our next success story.