Broken Arrow: Bankrupt Trucking Company Employees Year-long Wait for Pay
Arrow Trucking closed its doors and filed for bankruptcy a year ago, but it is has taken that long for former staff and truckers to see some money. The bankruptcy court finally approved a $2 million payment as a "priority" to ex-employees. The case also highlights the issues facing many trucking owner/operators and the pitfalls of working as a contractor in today's economic climate with some former contractors now having to put up their own trucks for sale.
The priority payment was recently approved and a long-list of ex-Arrow staff is in line to receive payments, hopefully in time for Christmas. The coffers of the bankrupt Arrow Trucking company are running dry however; with $2 million being paid to former employees, on top of the $800,000 already distributed, this leaves $1.5 million for other "administrative" claims for pay and expenses.
While the 232 ex-employees are at least getting some money out of the bankruptcy, the case shows how hard it is to get anything out of a company which has ceased to do business, even one which is following the process for winding up its affairs. For contractors, the position is not the same as for employees, they do not get any prioritization in the trucking company's bankruptcy and will only get a payout if they have either, (a) a secured debt (not likely), or (b) are lucky enough for the bankruptcy trustee to still have money available to pay them when he has paid the employees, the IRS, any secured debts and of course, himself (again unlikely).
Contractors are in a rock and a hard place, and this is a common problem with trucking companies facing going to the wall or simply a tight squeeze on their cash flow. So what can be done to avoid getting into the same situation?
First, we know you love paperwork, but this is important because it is what will get you paid – submit your invoices fast! Invoice weekly rather than monthly, and if you can invoice per job do that before submitting weekly bills (this is impractical for most of us, and for your customer's accounting people too). The sooner you submit your invoice, the sooner you get paid.
If you are dealing with company which is a slow payer, speak to accounts and find out why it is taking so long to get paid. Many companies slow payouts down to improve their own cash flow, which is like robbing Peter to pay Paul. Go up the company chain to find who is making the decision and ask for your invoices to be honored. Companies typically add interest and penalties for late payment – you should do the same.
Finally, if you are dealing with a company you know is having trouble, look at getting paid upfront. Even if you get some of the money upfront or deposits into escrow, you are protecting yourself from coming home to find they have gone bust. If you are going to rely on the legal system to get your money back, you are on a hiding to nothing.