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Should I let my employees go after filing for Chapter 11?

On Behalf of | Sep 11, 2023 | Chapter 11 |

As a business owner, you may face financial difficulties that can threaten your company’s future. In such situations, it’s important to explore all the options available to you. One of those options is filing for Chapter 11 bankruptcy, which can help you reorganize your finances and keep your business running.

However, it’s important to note that filing for Chapter 11 bankruptcy isn’t a silver bullet solution. Managing your debts, assets and employees requires a careful and strategic approach. While letting go of your employees to cut costs may be tempting, doing so may not always be the best solution.

Other options for termination

In most cases, your employees will retain their jobs unless your reorganization plan specifies otherwise. However, filing for bankruptcy requires changes to your business operations that will affect your employees’ working conditions, including:

  • Changes in working hours
  • Reduced pay
  • Renegotiation of their employment contract

Filing for bankruptcy does not necessarily mean that you have to terminate employees. You can keep them and continue business operations while you restructure your finances. However, if you do resort to layoffs, you must comply with certain legal requirements.

Giving a reasonable notice

Under Florida law, following the Worker Adjustment and Retraining Notification (WARN) Act is crucial when laying off employees. The act requires businesses with over 100 employees to provide at least 60 days’ notice before a mass layoff or worksite closing. However, certain exceptions exist if layoffs or worksite closings occur due to:

  • Failing business
  • Unexpected business circumstances
  • Natural disasters

In such cases, the WARN Act emphasizes that employers provide as much notice to their employees as possible and explain why they reduced the notice period.

You should keep in mind that if you propose a reorganization plan, it must be in the best interest of your creditors. If you don’t present a plan, your creditors may propose one instead. Once they determine that it is necessary for your company’s financial recovery and it is approved by the court, they may include employee layoffs in your reorganization plan.

Ultimately, deciding whether or not to let go of your employees after filing for bankruptcy is a complex and challenging decision. However, by creating an effective reorganization plan, you can protect your valuable assets, keep your business running and minimize the impact on your employees.