4 Reasons Your Employees Should Not Suffer Because of Your MCA Debt

The advance was your decision. The missed paycheck is theirs.

Employees do not know the factor rate. They do not know the daily withdrawal amount. They do not know that the business signed a confession of judgment or that a UCC lien was filed on the day the advance funded. They know that they worked this week and that their compensation is expected on Friday.

When the MCA withdrawal consumes the funds that would have covered payroll, the employees bear a consequence for a financial decision they did not make, were not consulted about, and cannot influence. This is not merely unfair. It is, in most jurisdictions, illegal.

Wage Payment Is a Statutory Obligation

Most states require employers to pay wages on a regular schedule, often biweekly or semi-monthly. Late payment triggers penalties that accrue automatically. In New York, employers who fail to pay wages timely may be liable for liquidated damages equal to the unpaid wages plus attorneys' fees. In California, the penalties for late payment of final wages upon termination are severe. These statutes exist precisely to prevent the situation in which an employer's financial distress becomes the employee's financial distress.

The MCA agreement does not override labor law. No commercial contract does.

Employee Loss Accelerates the Collapse

When an employee's paycheck bounces, the employee begins looking for other work. In a tight labor market, they find it. The departure reduces the business's capacity to generate revenue, which widens the gap between income and MCA obligation, which increases the likelihood of further missed payrolls. The cycle is self-reinforcing.

In four cases we reviewed this year, the loss of two or three key employees following a missed payroll reduced monthly revenue by fifteen to twenty-five percent. The revenue decline made the MCA even less sustainable.

The Law Provides Tools to Protect Both the Business and Its Employees

An attorney can invoke reconciliation to reduce the daily MCA withdrawal, negotiate a standstill to pause it, or file for Chapter 11 protection to halt it entirely. Each of these remedies preserves the cash flow needed for payroll. None of them are available without legal counsel.

The business owner who pays the MCA and skips payroll is using the wrong tool for the wrong problem. The MCA has legal remedies. Payroll does not.

The Responsibility Is Yours. The Solution Is Available.

DEFENSE TEAM SPOTLIGHT

Todd Spodek

Lead Attorney & Founder

Featured on Netflix's "Inventing Anna," Todd Spodek brings decades of high-stakes criminal defense experience. His aggressive approach has secured dismissals and acquittals in cases others deemed unwinnable.

NY Bar Admitted Multi-State Licensed Federal Courts

Meet the Full Team

The decision to take an MCA was a business decision, made under pressure, often without adequate information about the true cost. The decision not to pay employees is a different kind of decision, one with human consequences that no settlement can reverse.

The funder will negotiate. The employee who leaves will not.

A consultation with an attorney who practices MCA defense can restructure the business's payment priorities, reduce or halt the MCA obligation, and ensure that the people who keep the business running are paid before the creditor who is draining it.