Keith A. Markel and David J. Kozlowski Examine How Employment Litigation Can Trigger Corporate Distress in Turnarounds & Workouts

Morrison Cohen Partner Keith Markel, chair of the Labor & Employment Practice and co-chair of the Luxury Brands Group, and Bankruptcy, Restructuring & Governance Partner Dave Kozlowski recently published “When Employment Litigation Becomes a Capital Structure Problem: Lessons from Society Pass” in Turnarounds & Workouts.

Using the Chapter 11 filing of Society Pass Inc. as a case study, the authors explore how a single employment-related judgment evolved into the event that ultimately pushed the Nasdaq-listed company into bankruptcy. They argue that significant employment litigation should not be viewed solely as a legal or human resources issue, but as a potential enterprise-wide risk with implications for liquidity, governance, financing and restructuring.

The article examines how disputes involving executive compensation, equity rights and other employment-related claims can create contingent liabilities that threaten enterprise value if not evaluated through both employment and restructuring lenses. The authors emphasize that involving restructuring counsel early—alongside employment counsel—can help companies assess solvency risks, preserve strategic flexibility and avoid allowing litigation to escalate into a bankruptcy event.

As the authors conclude, “Significant employment litigation should be evaluated not merely as a legal dispute, but as a potential capital-structure event.” By integrating employment, restructuring and financial analyses early, companies may be better positioned to identify enterprise risks before they become existential threats.

Subscribers to Turnarounds & Workouts may read the full article here.