Many of our clients ask about cash advances for their employment cases. Most of these requests come from wrongful termination and whistleblower cases, but victims of employment discrimination and harassment have bills to pay, too. Especially is this so when they are off work on workman’s compensation disability. There is a new industry out there that is not subject to California usury laws, and which will advance funds at extremely high rates. These companies routinely avoid usury laws by offering our terminated employee clients cash advances that are not repayable unless the client wins the case. We routinely recommend to our clients that they do not use these services. Part of our attorney-client retainer agreement mentions (and discourages!) the use of these services. Not only is the pay-back amount outrageous (in are cent case, in order to pay a car loan off, a client took out $3,500 and now owes approximately $9,000!), but the burden on our office to respond to lender inquiries regarding the status of the case is on-going and burdensome.
Another way to get advances, rather than loading up the employment law case, is to visit a pawnshop. With holiday bills coming due, more employee clients (including our executive, administrative and technical clients), are seeking funds to pay off holiday loans now coming due. To our high-end clients, the speed and privacy of pawnshop transactions outweigh the high costs. According to a recent Wall Street Journal article, loans up to $1 million can be had “without financial disclosures or bank hassles”. One lender charges up to 240%a year! Pawnshop revenue is estimated to top $15.5 billion this year, about a 7.2% increase from 2012. Small business owners are also going this route, as getting even a modest, routine bank loan these days can be a hassle. In many cases, our clients are selling homes and need only a short “bridge” loan. A recently settled employment case involved a cross-country move to a new location after the client complained that the work was not “as advertised” at her Northern California employer. She needed a short-term loan until her new assignment began. Some of our employees, who have been fired for no good cause, find that they do not have the credit to qualify for the traditional bank (and currently, low interest) loans. Very few pawnshops have “loan committees”!
Please! Think twice if you or a family member is terminated and looking for any kind of “loan” to survive. Hopefully, you will receive unemployment insurance payments from the California Department of Economic Development, or you will have the traditional six months’income in savings while you job search and/or relocate. If you don’t have to sell your home, consider a low-interest home equity loan. Even a credit card advance at 25% will be less expensive than the rates a pawnbroker or loan advance company will charge you. Ironically, in ou rmost successful cases where “punitive damages” are awarded to punish and make an example of terrible employer conduct (usually by a mid-level supervisor, which is the company’s responsibility in most cases), taxes must be paid on that part of the award. Kind of like winning a prize, you’ve always got to watch out for lawsuit taxes and we ask our clients to have a good financial consultant review our settlement offers from defendant California employers. Make sure you’re always liquid enough to pay your taxes without taking out loans. They are as sure as death and the high rates loan advance agencies charge! Take care out there. We practice employment discrimination, wrongful termination, and whistleblower law, representing only employees in California. We are proud of our reputation as a statewide California employee-side law firm. Please consider this blog, as always, educational in nature. Only an attorney familiar with your case and practicing employment law in your jurisdiction can give you legal advice.