Jun 02 2009
Why a Personal Guaranty in an Employee Leasing Contract?
Maybe a hand full of times each year I’m asked about the personal guaranty on an employee leasing contract. Why is it there and what’s the purpose?
The main purpose of this area in the contract has to do with payroll. Here’s the scenario: If Joe, the owner of ABC Plumbing, calls in hours for payroll on his employees, then closes the business the next day and takes off – the PEO is responsible for paying the employees who got ditched.
So, if incorporating can shield you personally from liability as a result of bad business practices – this section can strip that privilege away and in this case allow the PEO to go after Joe personally. I’m not aware of any other cases or regular issues that arise where the personal guaranty has been used. If you know, write me a note - I would be interested in hearing about it.
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