Closed Hospital Owes Former Employees $2 Million in Alleged Wage Theft

The Madera Community Hospital in California closed its doors in January after struggling to pay its bills. But a member of the board recently confirmed that the hospital still owes some $2 million to former employees in the form of unused vacation time, sick time, and other compensation time based on the facility’s records.

The non-profit 106-bed facility shut down due to a lack of inpatient stays and management said demand for its services have been declining for years.

“Madera Community Hospital is dedicated to continuing services to our patients that are in the hospital and will ensure that they are safely transferred or discharged,” the hospital said in a statement earlier this year.

Saint Agnes Medical Center of Fresno, CA and its parent company, Trinity Health, were in talks to purchase the financially troubled hospital before backing out of the deal at the last minute.

“Trinity Health, Saint Agnes and Madera entered into this process with every intention of reaching a positive outcome,” Saint Agnes President and CEO Nancy Hollingsworth said in a statement. “Unfortunately, given the complex circumstances and the additional conditions imposed by the AG … it became clear we could not move forward.”

When the deal with Trinity Health fell apart, Madera didn’t have enough money on hand to pay its debts. Even though the facility is now closed to the public, it still employs and pays 32 employees, including the Chief Executive Officer Karan Paolinelli. The hospital says it is maintaining a skeleton crew to complete the hospital’s closure and that it is still hoping for a buy-out.

State laws require employers to pay their workers in full upon separation, including vacation and sick time. The company must also provide pay on the worker’s last day of work.

Paola Laverde, a spokeswoman for the California Department of Industrial Relations, said the hospital’s employees could be considered victims of wage theft.

“Employees whose employers fail to pay them are victims of wage theft,” Laverde explained. “These workers can file a wage claim with the Labor Commissioner’s Office to try to get their back wages paid.”

She added that if an employee hasn’t been paid by or on their last day or work, they “should file a wage claim for waiting time penalties that include an additional payment for each day that the employer withholds the employee’s final paycheck for up to 30 days,” she said.

“No employee didn’t get their paycheck that worked that week or that two-week period, but anything that we had on the books, we weren’t able to pay at the time,” said Stell Manfredi, vice chair of the Madera Community Hospital board. “That will get paid, hopefully, at a later date.”

Manfredi said the hospital discussed the possible issue of wage theft with its legal representation and that the management hasn’t paid the back wages because it was expecting the acquisition to go through.

“The bottom line is, if you can’t pay your bills, you can’t pay your bills,” he said. “We are familiar with that, and it’s not like we had all the money there and we didn’t pay them.”

Riley Walter, an attorney for the beleaguered hospital, said the hospital simply had no funds to pay its employees and is working on resolving the situation as soon as possible.

“In other words, if you had 10 employees and you wanted to pay the first two, and just get them off the books, but the others didn’t get paid, well, that’s not the way it works in the bankruptcy process,” he said. “You can’t pick and choose who to pay if you don’t have sufficient funds to pay all your bills.”