Lauren Teukolsky’s commentary was featured in a recent Law360 article discussing how California plans to handle wage complaints stemming from the collapse of Silicon Valley Bank (SVB). SVB catered to the tech industry for decades before collapsing and being seized by regulators on March 10, 2023. Its collapse made it the largest lender to fail since the 2008 financial crisis and left many of its depositors scrambling to make payroll.
Following SBV’s collapse, the California agency that enforces the Labor Code sent an email to employment defense firm Littler Mendelson providing them with assurances that any employers affected by the bank collapse who attempted in good faith to make payroll would not be subject to penalties for late wage payments. The agency said that it would divert any claims filed by employees under the Private Attorneys General Act (“PAGA”) related to the bank collapse, effectively preventing private lawsuits against employers from moving forward.
While employers and management-side law firms breathe a sigh of relief, workers’ attorneys have voiced concerns that employees need similar protections because many of them live paycheck to paycheck and may default on their own obligations if they don’t get paid. Employees may not be able to pay rent or make minimum payments on credit card bills, leading to the imposition of monetary penalties. The bank failure raises the question: who should bear the risk of a bank default, the employer who controls where the funds are kept, or the employee? Law360’s article states:
“’Banking crises generally can lead to significant impacts on workers,’ said Lauren Teukolsky of Teukolsky Law. ‘It's all well and good for the LWDA to say that employers will be protected. I would like to see similar kinds of protections for employees.’
Teukolsky added, ‘Bank failures are not novel at this point, and so I would hope that employers have some contingency plan for having some cash on hand to make their next payroll.’”
To read the Law360 article in its entirety, click here. To get in touch with Teukolsky Law, click here.
Lauren Teukolsky is the founder and owner of Teukolsky Law, A Professional Corporation.