When the cards are stacked against you

Jim Taylor says his first redundancy cost him "dearly". Taylor (not his real name) woke one day to find his employer had been placed into receivership.

Jim Taylor says his first redundancy cost him “dearly”.

Taylor (not his real name) woke one day to find his employer had been placed into receivership. The employer not only owed him a five-figure sum in commissions that would never materialise, but Taylor had also been left with a “huge” company credit card bill that the firm had never paid.

Losing his job turned out to be the least of Taylor’s worries. Diners Club, the credit card company involved, told him to repay the bill or they would sell his house.

“Unbeknown to me, the managing director was also using my card account for international travel,” he says. “They also hadn’t paid the account for many months.

Because it was a company account I didn’t see the invoices, or I would have known that the account wasn’t being paid.”

How many of us trust our employers to pay for these work-related expenses, when as the law stands we would be liable for them if our employer ceased trading?

Taylor learnt this to his cost. The grim reality is confirmed by the credit card companies, the Ministry of Commerce, the Employers & Manufacturers Association and the Engineering, Printing and Manufacturers Union.

Diners Club didn’t respond to Computerworld’s calls, but American Express spokesman Craig Dowling says his firm’s liability clauses usually prescribe that the employee is liable for debts incurred on a company credit card if the company can’t pay. The employee cardholder could argue that some debts were not charged up in his or her name, but they would have to go through a disputes process, Dowling says.

A spokeswoman for Associate Commerce Minister Laila Harre says that the credit card company, as any other company involved in giving credit, will want to ensure that it is able to effectively recover any debt owed to it.

“That is why an agreement signed by the employee for a company credit card is likely to contain a clause making the employee jointly and severally liable for the debt.”

Harre’s spokeswoman says in many cases it will be easier to pursue a debt against an individual than the company.

“This is simply because when a company is insolvent there are likely to be many creditors seeking a share of a small number of assets. The employee, however, is likely to have sufficient assets and only one creditor — the credit card company.”

Consequently, says EPMU advisor Tony Wilton, to minimise this risk an employee shouldn’t accept a company credit card — or anything else — that carries personal liability, particularly where the employee has no control over all the transactions.

Wilton advises it would be better to use a personal credit card and claim prompt reimbursement for each item bought on business purposes. “At least you keep control that way,” he says.

EMA (Northern) advisory services manager Peter Tritt says no one can force staff to sign up for a credit card unless it is in an employment agreement.

“I have a staff member who refuses to accept a company credit card for that very reason — even though the day the EMA would not be able to pay its bills would seem almost inconceivable,” he says.

However, Tritt says the “fraudulent” use of someone’s card by a company manager or anyone else raises other issues.

“Was the employee aware it was happening. If so, what steps did he take to stop it? The card is in the employee’s name after all.”

As for Taylor, in the end he paid the debt. He refinanced his house, knowing that Diner’s would otherwise get a court order to sell it.

He wanted to sue his former employer and saw a major law firm that had just lost a similar case against American Express. The lawyers said it would cost at least $10,000 just to get things started, with no guarantee Taylor would get his money, especially if his former MD declared himself bankrupt, got charged with fraud and went to prison.

The MD declared bankruptcy and Taylor says he called in the Serious Fraud Office, but SFO later dropped the case.

The event happened some years ago, but Taylor says it remains a good lesson for being careful about what you sign when you join a new company.

“You just don’t read the fine print or consider the consequences because you want the position and you are joining in good faith,” he says.

Greenwood is Computerworld’s HR reporter.

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