An unexpected corporate bankruptcy this month in Los Angeles has cost thousands of temporary contractor workers at UnitedHealth Group Inc. and Northwest Airlines two months' worth of pay.
The bankruptcy of payroll services firm Axium International Inc. has effectively locked up the wages owed the contract employees for work done in December and parts of November and January, UnitedHealth said. Northwest Airlines wouldn't comment.
The bankruptcy reportedly affects about 3,000 contract workers at UnitedHealth and several hundred workers at Northwest. Several Hollywood film companies that used Axium's payroll services also were affected.
"I think people are shocked," said Greg Allers, an Edina management consultant who has worked as a contractor at UnitedHealth since June. "The reaction is pretty much disbelief." He declined to say how much he is owed, but he noted that his expenses for things such as out-of-town travel also have not been reimbursed.
UnitedHealth said Thursday that it will pay some -- but not all -- of its contractors about half of what they are owed, because that portion of the money hadn't been transferred to Axium yet.
Northwest had no comment concerning its plans.
Allers disagrees with that approach and said he believes that the two companies should consider paying their contractors for all the work they've done, particularly because the contractors were required to use Axium subsidiary Ensemble Chimes as a payment agent.
"I've talked to some contractors who are single mothers, and they don't have enough money that they can afford to let two months pay go," Allers said. "I think UnitedHealth and Northwest Airlines could afford to take this on the chin."
Others echoed his view.
"I've never run into anything like this before, and it's been a pretty traumatic week," said one UnitedHealth contractor who asked not to be identified. "Some contractor firms could go out of business because of this." Companies use contractors for a few months at a time, typically highly paid professionals who provide expertise in management, information technology and other fields.
Axium's largest creditor this week sued the company's former principal owners, alleging fraud and theft. Because of the creditor lawsuit and the allegation that Axium owes millions of dollars in back taxes, there may be no money left to pay the Minnesota contractors.
"It's too early to speculate on what will happen if bankruptcy liquidation means there is no money for the contract workers," said Karl Oestreich, a UnitedHealth spokesman. The company doesn't know how many of its contract workers may be in financial difficulty because they haven't been paid, he said.
Axium filed for Chapter 7 bankruptcy, meaning that it will go out of business and its assets will be divided in an attempt to pay its debts. As a result, the bankruptcy court froze the contractors' wages that UnitedHealth had already paid to Ensemble Chimes for work the contractors did between early November and early December. UnitedHealth hadn't yet paid the December-to-January wages.
Northwest would say only that it is seeking a replacement payroll processor for Ensemble Chimes.
Steve Alexander • 612-673-4553