UnderCover Waitress: When Restaurants Go Bankrupt

Wednesday, October 19, 2011

When Restaurants Go Bankrupt

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I reported last week about Friendly's declaring Chapter 11 bankruptcy and closing some of their restaurant locations. The franchise will continue at this time, but leaves in its wake a portion of their workforce who are suddenly unemployed. The workers were given no notice whatsoever. They expected to return for their next shift and the next shift didn't exist.

I usually find myself advocating for the little guy. I think the treatment of the workers was egregious, and that they should have been given a "heads-up" that they would need to start looking for other employment. This, however, is my personal opinion.

The question came up:

Is there any way the staff can sue for not being told? 


Please remember that what is legal is not always right. And things that are illegal are not necessarily bad or wrong. The definition of "good" and the definition of "legal" are different. Legal is what we say is legal; legal is only what the law states.

Had an informal chat with a lawyer friend who made some salient points about restaurants and bankruptcy. After filing bankruptcy, one's debts are dismissed. That means creditors do not have the reasonable expectation that they will be paid.

If the news gets out that a restaurant is declaring bankruptcy, suppliers may cease to make deliveries while the restaurant remains open. They would be worried about not getting paid for those last few deliveries. Hourly and salaried employees may simply not show up to work because they may not be compensated for the last pay period. (We all know wait staff make money from customer tips.)

The needs of the corporation are at odds with the needs of the workers. The workers needed notice to protect themselves from unemployment. The corporation needed secrecy to protect itself in the last few weeks of doing business. And the corporation felt it was too risky to trust the workers with confidential information.

Obviously, we live in a society that values the needs of corporations over the needs of people.


  1. Something like this happened in our town. The restaurant went bottoms up (it was independent, not a chain) and simply locked the employees out. Most of them were still owed their last paycheck (which they never got), so they broke in, stole as much as they could (food, alcohol, kitchen equipment, anything) and not a word of it was mentioned again. Though now it`s sort of a legend in my hometown.

  2. Wow! I'll bet that went down in history.

  3. If only the owners secured restaurant insurance, maybe they wouldn't have closed down. If they did, at least the employees would have been protected.

  4. If only the employees got wind of this even weeks before the close down, they could have gotten the services of a bankruptcy lawyer Phoenix to protect their rights.

  5. Gosh, you guys wouldn't just be trying to get your links in my blog, would you? Shocking.


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