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(Guardian)   Restaurant chain convinces its employees to become unsecured creditors, which they will in no way come to regret come the inevitable bankruptcy filing   (theguardian.com) divider line
    More: Asinine, Money, Pension, National Insurance, Restaurant staff, Payment, Employment, Wage, Tomahawk Steakhouse chain  
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1625 clicks; posted to Business » on 01 Mar 2021 at 7:35 PM (6 weeks ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook



26 Comments     (+0 »)
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2021-03-01 5:34:59 PM  
interest-free too

all the risk, none of the reward
 
2021-03-01 5:42:54 PM  
As employees, they're already last in line to get paid if the company goes tits up. How much worse can it get?
 
2021-03-01 5:45:58 PM  
Howard Eggleston, who founded the company in 2017, defended the scheme, saying it had been given overwhelming support from staff.

Then your staff are woefully uneducated about money.

"We have 500-odd staff and we have had 100% take-up on the offer to try to help the company through," he told the Guardian. "It is a voluntary agreement, the word loan stipulates what it is, we will pay it all back.

Uh-huh.  "Take a 10% pay cut or we will declare bankruptcy and you'll lose your job" is not exactly voluntary, even when you say you'll pay it back.  How much do you want to bet they have not come close to maxing out the possible loans (with interest) they could have gotten under COVID relief?
 
2021-03-01 5:55:32 PM  

bingethinker: As employees, they're already last in line to get paid if the company goes tits up. How much worse can it get?


would you rather get 9 weeks of full pay then laid off, or 10 weeks less 10% pay then canned

i'll take the former - start the unemployment earlier and it's a clean break instead of feeling like you've been screwed out of your 10%

or they use the government loans instead of pleading poor to your underpaid employees
 
2021-03-01 6:20:00 PM  

bingethinker: As employees, they're already last in line to get paid if the company goes tits up. How much worse can it get?


Employees are pretty high up in line if a company goes bankrupt. In the UK secured creditors, like banks with a mortgage etc, are first then employees are next along with the taxman, well ahead of unsecured loans, suppliers etc, with shareholders last. Shareholders rarely get anything because if there was money to pay off everyone else with some left over for shareholders then why was the company put into bankruptcy in the first place?
I worked for a company that went under, and we all got all our pay.
 
2021-03-01 6:22:21 PM  

Dead for Tax Reasons: would you rather get 9 weeks of full pay then laid off, or 10 weeks less 10% pay then canned


But it could be nine weeks of full pay and then lose your job or ten weeks at 90% and the company survives, pays you back and you keep your job. Depends on if you trust the bosses. This is a small company so chances are all these employees know the owners and are willing to trust them.
 
2021-03-01 7:39:03 PM  
If an employer asks you to help pay the bills your next move should be to start sending out resumes.
 
2021-03-01 7:54:01 PM  

Carter Pewterschmidt: Dead for Tax Reasons: would you rather get 9 weeks of full pay then laid off, or 10 weeks less 10% pay then canned

But it could be nine weeks of full pay and then lose your job or ten weeks at 90% and the company survives, pays you back and you keep your job. Depends on if you trust the bosses. This is a small company so chances are all these employees know the owners and are willing to trust them.


Trust has nothing to do with it. They are extorting their workers for a zero risk, 0% interest loan by threatening their jobs. Whether you trust the bosses or not, would you want to be the one person in a small company who says no to the deal when its framed as necessary to keep the company going?

They could just as easily get a low interest loan from the government but are forcing their low-wage employees to make this decision knowing they have all of the leverage.
 
2021-03-01 7:59:40 PM  
Interesting. I suppose it's better than the "okay we are all taking 10% pay cuts because times are hard" routine. At least in this instance they technically had a choice and technically have at least a running total of how much they are shorted and the potential to get it back if they come out the company comes out the other side. However it's not much better. Hopefully they get paid.
 
2021-03-01 8:23:33 PM  
Couldn't they have issued some % of steak in the company in exchange of payout, with a set day of buyback?
 
2021-03-01 8:27:25 PM  

bingethinker: As employees, they're already last in line to get paid if the company goes tits up. How much worse can it get?


Wat? That's the exact opposite of how that works.
 
2021-03-01 8:28:31 PM  

Howling Fantods: Trust has nothing to do with it. They are extorting their workers for a zero risk, 0% interest loan by threatening their jobs.


The pandemic and the lockdown is what is threatening their jobs. The company is saying "We could go under. If you want to help us we have a better chance of surviving and everyone keeping their jobs". In a company this small they'd know the bosses and be able to judge whether they are genuine or not. A company this size will be worker/assistant manager/branch manager/operations manager/owner.
It's not like Walmart where most workers don't even know the CEOs name let alone have ever met them.
 
2021-03-01 8:33:30 PM  

zjoik: Couldn't they have issued some % of steak in the company in exchange of payout, with a set day of buyback?


now the employees are responsible for dry aging the steaks on their own time?
 
2021-03-01 8:35:41 PM  

Dead for Tax Reasons: zjoik: Couldn't they have issued some % of steak in the company in exchange of payout, with a set day of buyback?

now the employees are responsible for dry aging the steaks on their own time?


They gotta mature  somehow.
 
2021-03-01 9:08:20 PM  
That's just a 10% pay cut. They'll never get that money.
 
2021-03-01 9:10:28 PM  
100% acceptance on a voluntary program? Either a) some of those employees' first time hearing that it was voluntary is from TFA, or b) they had the choice to subsidize their employer or find a new job, or a choice between lending 10% and a 10% wage reduction.
 
2021-03-01 9:47:02 PM  

bingethinker: As employees, they're already last in line to get paid if the company goes tits up.


In restaurant work, when the place closes you can usually steal lots of food/booze to make up for the loss of your final paycheck.
 
2021-03-02 1:30:57 AM  
The chain said it had supported staff during the coronavirus crisis by placing them on the government's furlough scheme, as opposed to making them redundant, and "now we respectfully ask, in these difficult times, for you to support us".

Nope.

This is a company ripping off its employees. Period. Interest-free garnishment of my gross wages isn't "supporting you," it's "screwing me."

cefm: That's just a 10% pay cut. They'll never get that money.


Exactly. Without interest, they're simply knocking 10% off their gross pay & keeping the result.

The thing to learn, quickly, is to be able to say "no" and mean it. Walk away, folks - if the restaurant chain's this strapped for short-term cash & unable to obtain a loan, they're not long for this world in any case and all you're doing is taking a hit to keep money in a rich guy's pocket.
 
2021-03-02 5:33:35 AM  

Carter Pewterschmidt: shareholders


Call me naïve but way not ask the shareholders for the money?  They're the owners of the company.  The shareholders are the ones with a stake in keeping the company afloat.  I know if I ran a lemonade stand and business got slow, I, as the owner of the business, would have to toss in some of my own cash to  cover fixed costs until business picked up.  Why would a restaurant chain be any different?
 
2021-03-02 8:30:51 AM  

Muta: Carter Pewterschmidt: shareholders

Call me naïve but way not ask the shareholders for the money?  They're the owners of the company.  The shareholders are the ones with a stake in keeping the company afloat.  I know if I ran a lemonade stand and business got slow, I, as the owner of the business, would have to toss in some of my own cash to  cover fixed costs until business picked up.  Why would a restaurant chain be any different?


This is one of the most fundamental elements of limited liability companies. It means shareholders cannot be forced to pay for losses. Because without that few people would ever agree to buy shares or risk starting a company. Do you have a pension? An IRA? A 401K? (Assuming you're American for the last two) Or a stocks ISA or an employer share scheme if you're British? Are you in a trade union that has a pension scheme? If yes to any of those then you're a shareholder. Would you like to suddenly get a demand to hand over huge sums of money because one of the companies you own shares in has gone under?

There are rare exceptions. If you become a Lloyds member you had unlimited liability for insurance losses, and every now and then those people would get huge debts to pay.

And this same protection also exists for people, not just big corporations and "fat cat" billionaires. If you go bankrupt because of medical debt and losing your job the bankruptcy court will limit what you have to pay and give you a fresh start, so you don't have to spend the rest of your life living under a debt you can never repay and having it take all your income, forever.

It is a trade off that society has decided is worth living with. The benefits of making sure millions of people are not screwed by a company going under is worth the price of not demanding the owners of those companies are forced to pay those debts. There are laws to make sure they are held liable if they actually acted fraudulently or recklessly.
 
2021-03-02 9:16:54 AM  

Muta: Carter Pewterschmidt: shareholders

Call me naïve but way not ask the shareholders for the money?  They're the owners of the company.  The shareholders are the ones with a stake in keeping the company afloat.  I know if I ran a lemonade stand and business got slow, I, as the owner of the business, would have to toss in some of my own cash to  cover fixed costs until business picked up.  Why would a restaurant chain be any different?


Just to add, a company can ask shareholders for money. Barclays for example a few years ago. But shareholders are not forced to cough up. If you don't your stockholding just gets diluted slightly, so instead of owning .00001% of a company you might end up with only .000005%. But owning a smaller share of a company that is now (in theory) more valuable should mean you haven't actually lost out.

But asking shareholders for cash with "We need this because we're about to go under!" is more likely to cause shareholders to run away, along with customers, suppliers and lenders meaning the company is more likely to go under.
 
2021-03-02 10:18:46 AM  
100% of our *cough* current employees have sighed on because we fired the other ones...
 
2021-03-02 12:32:26 PM  

Carter Pewterschmidt: bingethinker: As employees, they're already last in line to get paid if the company goes tits up. How much worse can it get?

Employees are pretty high up in line if a company goes bankrupt. In the UK secured creditors, like banks with a mortgage etc, are first then employees are next along with the taxman, well ahead of unsecured loans, suppliers etc, with shareholders last. Shareholders rarely get anything because if there was money to pay off everyone else with some left over for shareholders then why was the company put into bankruptcy in the first place?
I worked for a company that went under, and we all got all our pay.


I missed that this was in the U.K. In most countries, employees are not protected like this.
 
2021-03-02 1:12:15 PM  

Daer21: bingethinker: As employees, they're already last in line to get paid if the company goes tits up. How much worse can it get?

Wat? That's the exact opposite of how that works.


Secured creditors come first. The rest fight over crumbs, scraps if they are lucky. Employee-owed debts are an unsecured debt, so you are behind all the deep, empty pockets.
 
2021-03-02 4:02:36 PM  

SumoJeb: Daer21: bingethinker: As employees, they're already last in line to get paid if the company goes tits up. How much worse can it get?

Wat? That's the exact opposite of how that works.

Secured creditors come first. The rest fight over crumbs, scraps if they are lucky. Employee-owed debts are an unsecured debt, so you are behind all the deep, empty pockets.


In the UK employees wages are Preferential Creditors.

The order is Secured, Preferential, Secured Floating, Unsecured and then finally Shareholders. I worked a place that went under years ago. We all got every penny of pay we were owed. The final settlement for unsecured creditors was something like 5p in the pound.

/And the very first thing that administrators got us to do was to make sure all customer paid for items were properly labelled and that we called all those customers and told them to come and collect them ASAP so there was no chance they'd be lost in the administration.
 
2021-03-02 10:57:13 PM  
Photo of the owner of Tomahawk Steakhouse:

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