[cbayram]

Playing out this scenario:

Will missing payrolls result in layoffs/resignations? Thus, increasing unemployment rate that the FED desires. If contagion doesn’t spread outside of tech/startup, does the government have any incentive to intervene? Maybe this is not too big to fail.

A sale seems like the most likely scenario out of this liquidity problem (insolvency). It’ll be dirt cheap and has to make sense to its buyer.

edit: Even with recent downturn in tech, there is still sizable value in having tech as banking clients.

[dboreham]

Employers are legally on the hook for payroll so what will happen is management/stock holders will foot the bill.

[cjblack]

Management and shareholders would not be personally on the hook for missed payroll in the event of insolvency.

If all the cash evaporated from my company's account, we were forced to declare bankruptcy, that's pretty much game over. The employees would be among other creditors figuring out their turn to pick over the remains. The employees may end up near the top of the list, but they wouldn't get to hold the C-Suite or shareholders accountable on a personal level.

They're contractually obligated to pay their employees, but that contractual obligation rolls up to the company level, not the people who run or own it.

[ValG]

I don't which other states may do this, but in Cali Labor Code Section 558.1 - company managers and owners are personally liable for missed wages. It is a codified approach to piercing the corporate veil. I learned this well when we had a single digit bank account and were waiting on funding to get wired in as payroll was coming due.

[cjblack]

Ahh I wasn't aware of this - wow. Thanks for informing me. Can't imagine the stress some of these depositors must be under with that added personal liability on top.

[paulddraper]

Geez, lesson learned don't be a manager.

[noughtme]

I think the implication is that companies won't have enough cash on hand to make payroll in future periods, so will layoff staff to cut payroll expensess.

[capableweb]

And finally, if management/stock holders cannot/evades paying it out, it's tax payers who end up footing the bill.

[paganel]

Supposedly these jobs are the “good” jobs to still have around no matter what because, again, supposedely, they create innovation, which innovation then creates an increase in productivity (among other things), which increase in productivity has been one of the Holy Grails of mainstream economics for the last half century (with the FED being a pillar of said mainstream economics).

So, in that light, losing these jobs would be like throwing away the kid with the bathwater.

I personally don’t agree with all the premises and conclusions I’ve enumerated above, but imo that’s how a mainstream economist (like one working for the FED right now) is most likely to view things.

[lazide]

It’s the tide going out - we’ll see who’s swimming naked.

[infamouscow]

If you miss payroll the employees are under no legal obligation to continue laboring for you and the clock for resignations starts ticking. Many will not bother with a formal resignation because it's not clear the company still exists in any meaningful way.

I've also worked at both startups and large companies where problems with the bank or payroll software delayed payroll a day. In those situations there's typically overcommunication about the steps being done to get it resolved ASAP so employees don't walk out.