In the ever increasing occurrence of mergers, dissolutions and restructuring of businesses it is not uncommon for an employee to face a situation where he/she is owed wages for work performed, but these wages are unpaid because the entity that purchases the original employer is not willing to pay the wages due or is unable to pay compensation because of dissolution, bankruptcy and/or claims of creditors who argue that they have priority in repayment over other claimants.
Under the circumstances where the assets of a company are sold or transferred, employees may have a priority lien over other creditors for the proceeds of the sale or transfer of assets of a company under California Civil Code section 1205. Under that section all wages earned during the 90 days prior to corporate dissolution or other “not ordinary” business event have priority over virtually all other claims and must be paid first from the proceeds of the sale and transfer. One court noted that wage earners will prevail over other statutory lien holders, including secured creditors such as mortgage lien holders (Myzer v. Emark Corporation (1996)).