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Fellow Weekly Newsletter - Issue 38 - Minor Issues - Business Law and Ethics for the Shabbos Table

Publication: Fellow Weekly Newsletter

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3/12/10

Welcome to Fellow Weekly!

Encouraging intelligent and entertaining debate at your Shabbos table.

Fellow Weekly raises issues of business law and ethics through lively emails by featuring your real-life scenarios answered by our leading authorities and professionals.

This Issue is dedicated by

Nochum and Brocho Leah Ettlinger

Please daven for the good health and speedy recovery of:

Avraham Yeshaya ben Shulamis Basya

Moshe Yaakov ben Faige Devora - Chaim Kalman Shammai ben Dina

Yehudis bas Chaya Miriam Esther Yitla

CASE 139: Minor Issues

With the economy crumbling, Abe Schwartzman s automobile repossession business in Cincinnati, OH was booming. With banks calling non-stop for him to repossess collateral vehicles, Abe decided to open up a second office in nearby Louisville, KY. Abe hired Harry and Fred, two unemployed neighbors, as drivers; and eleven-year-old Keith to do some basic filing while school was out for winter break. The new office was managed by Abe s brother-in-law Michael.

While the Louisville office had an incredibly busy first week, Abe had not yet received most of the payments due from the banks for the repossessions executed; and due to initial startup costs, had very little cash on hand in time for payday. With $2,500 to spare, he owed Harry and Fred each $500, Keith $250, and Michael $1,500.

Little Keith overheard Abe and Michael discussing this dilemma and approached Abe privately.

"I heard that you are a bit tight with funds this week," said Keith. "Being that I don t have any personal expenses, I don t mind if you just wait until next week to pay me."

What must Abe do?

What is the law?

Please email us with your comments and answers at weekly@projectfellow.org.

Read next week's issue for the answer!

LAST WEEK'S CASE

CASE 138: Kenny s Kebab House

Kenny s Kosher Kebab House was a fast growing enterprise in the downtown business district of Columbus, Ohio. The Kebab House boasted two large executive banquet rooms , numerous private dinettes, and a general eating area. The friendly ambiance, professional service, and mouth-watering carte du jour drew an impressive crowd of satisfied customers. Nevertheless, the restaurant would experience seasonal ups and downs.

With the arrival of mid-winter vacation, sixteen-year-old Bernie Stein took a job at the Kebab House to help his parents cover the bills, as they were experiencing financial difficulties. He was a hard and responsible worker and took his job seriously. Bernie was happy to be able to help his parents help him.

February 15th was payday and Bernie was looking forward to receive his hard-earned $500 paycheck. Dennis too was looking forward to take home his bimonthly check of $3,000.

Kenny, eager to pay his workers on time, spent the afternoon in his office balancing his books. Time was ticking and Kenny was up against the wall. He was out of meat and had to place a $5,000 meat order to be delivered before dinnertime. A $200 electric bill had to be paid. Dennis and Bernie were both expecting their paychecks, and additional $3500.

Kenny broke out in a sweat when he realized that he had but $3,000 available.

What should Kenny do?

What is the law?

[Submitted by Rabbi Avi Hess: Member, Fellow-Yesharim Research Center - Jerusalem, Israel]

The Answer

We present you here with a concise ruling. For a more intricate elucidation, please see the detailed explanation below.

If the meat distributor would accept a late payment, Kenny must first pay his employees. He should pay $500 to Bernie, $2500 to Dennis (see Detailed Explanation), and pay both the meat and the electrical bills a few days late.

However, Kenny is not required to risk forfeiting his business in order to pay his workers on time [Pischei Choshen 9:15]. Since a restaurant that goes without food for one night risks ruining its reputation, he may pay his workers late should the meat distributor only accept payment in full upon delivery (assuming he cannot responsibly borrow the money).

Detailed Explanation

In determining which debts to pay first, it is important to: (a) categorize each debt form; (b) Define the nature, scope, and limitations of each form s payment obligations; (c) Ascertain the correct sequence within each category; and (d) determine how a debtor divides limited funds amongst creditors of equal import.

Our case implicates the necessity to focus on (a), (b), and (d) (Case 139 may necessitate a focus on (c) as well).

Category A: Wages

Kenny owes earned wages to his employees, Bernie and Dennis. Paying them on time, Kenny fulfills a positive commandment and avoids transgressing five negative prohibitions and one negative rabbinic prohibition for each employee [Choshen Mishpat 339:2] (See Issue 36). He properly fulfills the positive commandment by paying each worker on time, in full [Ahavas Chessed 9:10; Nesiv Hachessed 28].

Kenny is required to pay his employees if funds are available [Choshen Mishpat 339: 10]. He is obligated to extend an effort to procure the funds [Tosafos Bava Kama 9a, 46a; Tosafos Bava Basra 92b], but is not required to incur a considerable loss to do so. If funds are unavailable, he does not transgress the prohibitions but still does not fulfill his positive obligation [Ahavas Chessed 9:7].

Category B: Purchases

Kenny owes the electric company for the electricity he used, as he purchased kilowatts of power from the electric company. This debt is much like a balance due for a sale.

Note: While any fixed monthly fees might be considered a rental and as such should theoretically fall under Category A [Choshen Mishpat 339:1], since there is a spread of days when payment is accepted, we view such a debt as having an alternative payment plan and would not be subject to the general stringencies of Timely Payments (See Issue 36).

Kenny will incur a similar form of debt when placing his meat order from the distributor.

Application

Paychecks vs. Bills

Certainly, as in any debt, Kenny may not swindle or default, nor may he intentionally postpone available payment of any form of debts due [Leviticus 19:13; Ecclesiastes 3:28]. However, delaying payment of a worker s timely wages is a time sensitive issue, running the employer an additional risk of disregarding a positive commandment as well as transgressing many more negative prohibitions [Choshen Mishpat 339:2] (See Issue 36).

Hence, Category A objectively takes precedence over Category B. However, since an employer need not incur a considerable loss to pay an employee on time [Pischei Choshen 9:15], Category A takes precedence over Category B providing that delaying the meat or electricity payment will not incur considerable losses to the business.

Assuming the meat distributor would allow for a delayed payment and the loss for a late payment to the electric company is nominal, Kenny is required to pay his workers before the other two bills.

Bernie and Dennis

Both employees deserve to receive their payment on time. Thus, Kenny must divide his resources between all of his employees [Ahavas Chessed 9:8] (See Case 139 if one employee is needier than another [Ahavas Chessed 10: 8-11]).

A debtor must divide the limited resources equally among all creditors of equal importance [Choshen Mishpat 104: 10, Ahavas Chessed 9 Nesiv Hachessed 22].

Accordingly, as employee wages precede payment for received merchandise, Kenny must divide his limited funds equally among his employees. Hence, he allocates $1000 to Bernie and Dennis, paying them each an equal share of $500. Kenny is thus left with two thousand dollars, which he forwards directly to Dennis. Consequently, Bernie receives his $500 and Dennis a total of $2500, while the meat distributor and electric company must wait.

[Answered by the Fellow-Yesharim Research Center]

The Torah commands us to pay our employees on time:

An employee who finishes the job at night can expect payment by dawn [Leviticus 19:13].

An employee who finished the job during the day can expect payment before dusk [Deuteronomy 24:15].

This applies to rental fees as well [Choshen Mishpat 339:1].

Follow the next few weeks for an exciting series on "Timely Payments".

[Choshen Mishpat 339]

Comments or questions? Have a case to submit? Please send us an email at weekly@projectfellow.org

Although we aim to present the correct ruling, varying details are always important and decisively influence every individual case. Our readers are thus encouraged to present their personal cases to a competent authority and not solely rely on the information provided.

Fellow Weekly now reaches over a quarter of a million people worldwide via various publications. You can help build a better world. Just invite your friends and family to subscribe to Fellow Weekly.

To join this mailing list send an email to weekly@projectfellow.org with the word subscribe in the subject line.

Fellow - Yesharim Foundation for Ethical Law | 105/21 Sanhedria Murchevet | Jerusalem | Israel



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