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Home >> Checks/Money Orders >> Checks You Wrote
Employee's Duplicity Puts Us in Hole
We had an employee who lost his paycheck. We put a stop payment on the check and issued him a new one. Six months later, he took the original check to a check cashing center (not a bank) and cashed it. He got the money, but the bank denied payment and the check cashing center wants to take us to collection on the check. I explained the situation, but they insist we are responsible for payment. I think the previous employee and the check cashing center are the ones liable for payment. Please advise.
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 You may have a defense against the check casher based on the fact that the check was more than 90 days old when it was cashed. That makes the check overdue under the Uniform Commercial Code, and prevents the check casher from claimimg status as a "holder in due course."
According to the Uniform Commercial Code (you'll need to check out your state's version of that law), without holder in due course status, the check casher can't enforce the check against you, the bank can refuse payment simply because the check is older than six months, and the check casher will have to try to collect from the dishonest payee who got the cash. Be aware, however, that if the check had been cashed sooner (before 90 days from its issue date), the check casher's position would have been stronger, and you would likely be on the hook for the check amount. That would mean you would have to try collecting from your past employee.
Published on BankingQuestions.com 6/09/09
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