On Friday March 10, 2023 Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation where depositors were cut off from accessing their funds on deposit, which have been transferred to the Deposit Insurance National Bank of Santa Clara (“DNIB”). This closure has impacted significant amount of individuals and numerous employers.
Many employers have their business operating funds on deposit with SVB, which includes funds they intended to use to meet their payroll obligations. Given the closure, accessibility to these funds is limited, and it is unclear if and when employers will gain access to those funds in order to meet such expenses. Due to the lack of accessibility to these funds many employers are finding themselves in a position of potentially having to delay payroll. Despite the closure of SVB and these unforeseen circumstances, if an employer chooses to delay payroll payments they should do so with extreme caution.
California law requires that employers pay at least twice a month, and the paydays must be designated in advance and occur within a specific time. Failure to comply with those stated requirements may carry significant penalties and potential risk for a PAGA representative action for failure to pay on time. Employers should consider alternative sources of funding and financing and make timely furloughs or layoffs to minimize payroll cost.
While there are groups, such as CABIA that have already written letters to Governor Newsome to ask for the lifting of any penalties incurred due to late payroll given this situation, there is still uncertainty if any action will be taken.
This material in this article, provided by Chauvel & Glatt, is designed to provide informative and current information as of the date of the post. It should not be considered, nor is it intended to constitute legal advice. For information on your particular circumstances, please contact Chauvel & Glatt at 650-573-9500 for legal assistance near you. (photo credit: depositphotos.com).