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  1. #1
    Join Date
    Feb 2020
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    Question Who is Responsible for Employee Wages: Ceo or Cfo (100% Shareholder)

    My question involves business law in the state of: California

    The CEO wants to leave the company and remove his name from the corporation, or close it down. The CFO/investor is threatening that if the CEO leaves or closes the corporation, CFO won't pay the employees and will leave the employees to sue the CEO and be responsible for everyone's pay.

    Other (complicated information):
    The CEO has no shares.
    The CEO of company A is hired by company B. However, company B does not pay the employees or the CEO of company A. The CFO write the checks from company A and pays the employees and the CEO.
    Owner of company B is just another investor of company A.
    Company B "hired" company A so that the CEO of company A has a contract to sign based on duties, salary, etc. and would have to give notice before leaving the company.

    Is this a valid threat? Who is legally responsible for everyone's pay?

  2. #2
    Join Date
    Jun 2006
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    Massachusetts
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    24,243

    Default Re: Who is Responsible for Employee Wages: Ceo or Cfo (100% Shareholder)

    The person within a corporation who is legally responsible to pay the employees is the person that the corporation gives that authority/responsibility to. It is not set by law. However, the buck stops at the desk of the highest level officer.

    If the CEO leaves the company and the company remains open, he has no further responsibility to see that the employees are paid and the buck would then stop at the desk of the highest remaining officer. That may or may not be the CFO depending on the corporate structure. He may designate someone else to write the checks (Payroll comes to mind) but he will ultimately bear legal responsibility should it not get done.

    If the CEO leaves and shuts the company down, I would imagine that he would be responsible for seeing that the employees are paid before he shuts the doors.

    This answer is based on the limited information we have. Details involved in the actual corporate contracts and structure could change things.

  3. #3
    Join Date
    Oct 2014
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    7,710

    Default Re: Who is Responsible for Employee Wages: Ceo or Cfo (100% Shareholder)

    Quote Quoting healthhelp
    View Post
    Who is legally responsible for everyone's pay?
    The corporation is the employer and responsible for the employee's pay. They are employed by the corporation, not the CEO or the CFO. If they don't get paid, they sue the corporation, not the CEO or CFO. There are limited circumstances in which creditors of the corporation might sue the shareholder/officers of the corporation personally, but simple failure of the corporation to pay its bills (in this case wages) isn't one of them. Something more in addition to that simple failure would be needed.

    It's possible that the corporation might have a cause of action against the CEO or CFO if they fail in their fiduciary duties to the corporation, however.

    Note that salaries due to employees after the CEO leaves are not his responsibility in any event.

    The CFO is full of BS on this one.

  4. #4
    Join Date
    Feb 2020
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    4

    Default Re: Who is Responsible for Employee Wages: Ceo or Cfo (100% Shareholder)

    Quote Quoting cbg
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    If the CEO leaves the company and the company remains open, he has no further responsibility to see that the employees are paid and the buck would then stop at the desk of the highest remaining officer. That may or may not be the CFO depending on the corporate structure. He may designate someone else to write the checks (Payroll comes to mind) but he will ultimately bear legal responsibility should it not get done.
    Quote Quoting Taxing Matters
    View Post

    Note that salaries due to employees after the CEO leaves are not his responsibility in any event.

    The CFO is full of BS on this one.
    Thank you for all your answers. I really appreciate it. I have a few more if anyone is able to advise.

    If the CEO gave written notice of the last day of employment but is still currently the CEO on the documents (it will take time to file and be finalized), when is the specific date when the CEO is officially not liable for the employee wages and other duties? The last date of employment? When the Secretary of State finalizes/receives the removal request of the CEO?

    How does the CEO remove himself from the company? Is it the Statement of Information? (I read it's NOT through an amendment of articles of incorporation).

    Again, thank you for any help.

  5. #5
    Join Date
    Oct 2014
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    7,710

    Default Re: Who is Responsible for Employee Wages: Ceo or Cfo (100% Shareholder)

    Quote Quoting healthhelp
    View Post
    Thank you for all your answers. I really appreciate it. I have a few more if anyone is able to advise.

    If the CEO gave written notice of the last day of employment but is still currently the CEO on the documents (it will take time to file and be finalized), when is the specific date when the CEO is officially not liable for the employee wages and other duties? The last date of employment? When the Secretary of State finalizes/receives the removal request of the CEO?
    The CEO is just an employee. Once he/she resigns and leaves the corporation he or she has no further authority in the corporation. It doesn't matter how long after that the corporation notifies the Secretary of State of the CEO change as that is not what determines the period in which the person held the CEO position.

    Quote Quoting healthhelp
    View Post
    How does the CEO remove himself from the company? Is it the Statement of Information? (I read it's NOT through an amendment of articles of incorporation).
    Generally by notifying the board of directors that he is resigning. Again, he's just an employee like any other in this regard.

  6. #6
    Join Date
    Jul 2018
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    2,065

    Default Re: Who is Responsible for Employee Wages: Ceo or Cfo (100% Shareholder)

    As concerns a corporate officer's potential liability for unpaid wages, I suggest you review this article and the California Labor Code sections cited therein (section 558.1, cited in the article, cites numerous other sections, and I don't have time to look through them all).

  7. #7
    Join Date
    Sep 2010
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    19,482

    Default Re: Who is Responsible for Employee Wages: Ceo or Cfo (100% Shareholder)

    That doesn't mandate responsibility for coming up with the money. It just says if you are working for a company and violate the wage laws, you can be held responsible to the STATE.

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