Careful what you sign

[Medlin Software, Dennis]

While not likely an issue among this group, it is a topic I deal with daily. Who signs what and the ramifications.

For me, the usual issue is when an employer hires out payroll, but they use a gray processor (the processor is a calculator/print service and signs nothing). I remind the employer even if they hire out to someone who overtly takes on liability, the employer cannot buy out of the liability chain, and the gray provider has likely insulated themself from any liability. Thus, all employers and signatory persons need to get and maintain payroll knowledge.

Personally, I remind those I speak with to not sign or be a signatory on company accounts unless they also control the reporting of items they are signatory for, as signatory power means they will get named and may be held liable for failures. This ruling may be a case that makes responsibility not temporary.

What employee keeps insurance for this? I have company liability for my errors (as an owner), but I wonder if the above case, the employee is out of pocket for defense and loss.

[Randall]

It seems to me that the employee should also have access to the money (funds) in order to pay the withheld taxes.  But then that's me and not the court system.  I agree, don't sign anything.

 

[Max W]

This is a pretty clear cut case of someone who knew what he was doing, was one of only 2 persons in the company to sign check and basically admitted to these facts.

Here is a pdf of the case. It's only 8 pages long, but the first 2 will give you a complete picture.

COA 365480 JEFFERY C MERTZ V MICHIGAN D... - Per Curiam - Unpublished 06_12_2024.pdf

[Medlin Software, Dennis]

Thanks for the direct link. What I had was something from a newsletter where I can only post a snip. In my naiver days, I would sign reports for others (friends I was doing payroll checks, reports, and creating the checks. I stopped once I wised up. I won't even do payroll for friends, but I will teach them how.

Anyone about my age or olde will likely "catch" the name of Mertz. The court definitely said "Nertz to Mertz".

[Patrick Michael]

What a great father!  Mertz's father was an 80% owner of the company and left his son holding the bag.

[Terry D EA]

It's been a while but this scenario stuck in my head from studying for the EA exam. Can't remember which part but I do know the employee can definitely be held accountable. Probably a lot more to this story.

[Medlin Software, Dennis]

"Probably a lot more to this story."

The temp officer (at least in action) employee was naive (at best). Their testimony was 100% incriminating, tough to believe they even had representation. Oddly, I often get flamed when I point out how anyone who is part of the payroll process needs protection from this very issue. Even those who have no signatory power/responsibility. A payroll keypuncher who could have seen no withheld items were ever paid, those who login only to make deposits, etc., can all be named in a suit, and at best will have to pay to defend.

I carry insurance for frivolous suits, even though I am not liable at all, defense is expensive. I bet all here do the same.