[julienb_sea]

Realistically this encourages immediate furloughs, layoffs, firing or bankruptcy proceedings. There isn't a world where the companies actually get to the stage of "unpaid wages", there are many steps they can take to avoid getting into that legal boondogle.

[sethev]

Normally, yes. But in this case isn't it the upcoming payroll that's the problem? That work has already been done by employees, so the wage is already on the books. If they can't come up with the money, they'll have unpaid wages no matter how many people they fire. Right?

[Me1000]

Sure, but then they'll just furlough or lay off everyone. So employees get one payroll paid out, but then they don't get anymore, and the company and all the economic activity it produces are gone too.

[zuminator]

If your company is economically unviable, it's going to eventually fold anyway; that's not the workers' fault. But if it's profitable and just has fallen temporarily behind in payroll, then it's not like it has to pay back wages all at once, it can make arrangements to pay them back over a period of weeks or months. But what it can't do is just decide not to pay people for the work they have performed.

People are acting like there's some set of circumstances that makes wage theft reasonable. Situations where management forces the employees to work for free under threat of being fired are exactly why the corporate veil should be pierced in these matters.

[GeorgeWBasic]

It seems like there are circumstances that make it reasonable, though. And this isn't wage theft. This is where through no fault of the company, their bank closed down and their money is no longer theirs. It is in no way reasonable to make the company owners destitute over two weeks of pay. The corporate veil should remain here.

[Me1000]

Just because a company is unviable today doesn't mean it will be unviable a year from now, that's the whole idea behind investing. If this had happened to Google in 1999 (a year before they would eventually make money through advertisements) Google would likely not be able to make payroll, pay their server bills, or keep their office lights on.

Second, even if the company is profitable, they might rely on income from other companies screwed over today. Those companies might not be able to pay their bills. If I'm Sentry, Render, Mongo, or any other number of companies that gets most of their revenue by providing services to startups, I'd be worried right now. Even big cloud providers like AWS and GCP will likely take revenue hits. Big companies can float resources while this debacle gets sorted out, but small companies cant. I'm sure there are a bunch of startups out there that had $2 million in the bank which would give them a good 18 months of runway, and are now trying to prioritize cost cutting measures to help make that initial $250k of insured deposits last as long as possible. And that's permanent lost revenue for those companies.

Third, I'm not saying wage theft is reasonable (it's not), and I don't think anyone else is either. I'm simply trying to point out that piercing the veil isn't some magic bullet here. If a company has to close up shop that's probably the worst of all worlds. Employees lose their jobs with little notice and no severance, office owners need to find new tenants (in an already tough office real estate market), healthy companies seeing ripple effects start belt tightening as well. And in the event that the full (or majority of) deposits from SVB are eventually released to the bankrupt company, where do you think that money goes? Right back to the shareholders. Employees are still screwed.

Piercing the veil makes sense in a typical situation where a company has gone bankrupt and they need to find a way to meet their final obligations, but it's a little more complicated in this situation. There are plenty of healthy companies that will be healthy again once the FDIC is able to release deposits.

[theGnuMe]

I remember seeing an old offer letter from Apple that makes the rounds every once in a while where Steve Jobs said he would pay the guy in advance.

I remember the early dotcom days where a company would hold your first paycheck!