Employee Claims in an ABC: Wages, Benefits, and WARN Act Obligations

When a business makes an assignment, employees are among the most affected stakeholders. California law gives employee wage and benefit claims priority treatment — but the process for submitting and collecting those claims is different from a regular paycheck.

Priority Wage Claims

Employees who are owed wages for the 90 days before the assignment date have priority unsecured claims up to $4,550 per employee. This priority treatment means they are paid before general trade creditors. Employee benefit contributions owed by the employer also have priority status. The assignee should identify and contact all employees promptly after the assignment.

The WARN Act may require advance notice of mass layoffs. California’s WARN Act requires 60 days advance notice before a mass layoff affecting 50 or more employees. Businesses that make an ABC without providing WARN Act notice may have additional wage liability. The assignee must account for potential WARN Act claims in calculating the total employee claim pool.

The California ABC System gives business owners and creditors the exact tools, templates, and step-by-step guidance to navigate an Assignment for Benefit of Creditors — faster and cheaper than bankruptcy, without a federal court filing. Request your free evaluation here.