Recent disruptions in the financial services sector as well as an economic downturn in certain industries, including high tech, may create an immediate and unanticipated liquidity crisis for impacted employers. When faced with these circumstances, employers may not have enough cash on hand and may consider skipping payroll obligations to conserve cash. Skipping even one payroll, however, can have dire legal consequences for the company and may impose potential personal liability on officers, directors, and even managers, making an already bad situation worse. Before skipping payroll obligations, employers should know the following:

• Almost every state has laws regulating the payment of wages to employees. The laws of the various states where your employees actually perform work for the company will normally govern, not the state where the company is headquartered or incorporated. These state wage payment laws, in addition to the federal Fair Labor Standards Act (FLSA), must be considered before any pay dates are missed.
• Some state wage payment laws have very significant penalties, such as daily fines for each day a worker goes unpaid, triple damages, attorney's fees, and others. If faced with any of this, employers should always consider alternative sources of cash or deferment of other expenses, rather than missing a payroll. Wages are usually defined to include base compensation, commissions, bonuses, and in some states, vacation/personal time off that has been earned...

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