State Wage Collection Laws: Supplementing the Bankruptcy Act

The general problem to be considered here is that of the employer\u27s insolvency and consequent inability to pay wages which have already been earned. More specifically this comment examines the various types of state legislation designed to assist employees in the collection of these earned but unpaid wages, with primary consideration directed to those statutes which enable the employee to circumvent the limitations of the federal Bankruptcy Act. State wage priority statutes are therefore not included, nor are general creditor collection devices, criminal sanctions against non-payment of wages, and laws authorizing the assignment of wage claims to an administrative agency for collection. The Bankruptcy Act provides one method of collecting unpaid wages, but this remedy is frequently inadequate from the employee\u27s standpoint because of the limitations imposed by the act. These limitations, though necessary for the protection of other classes of creditors, can, in many cases, mean the loss of earned wages if the employee has no remedy other than his claim in the bankruptcy proceedings. The major limitation is the size of the distributable bankruptcy estate. Wage claims, like the claims of other unsecured creditors, can be paid only from assets remaining after secured creditors and lienors have realized on their security. If the employer\u27s property was heavily mortgaged or subject to large tax liens there may be nothing left for unsecured creditors