Just another thought here. Was this a cashier's check? The bank will often cut the employee a cashier's check which adds a new dimension to the event.

The check is actually made payabe to "John Doe". Can he sign over his rights as HDC to a third party? Or is he the only legal HDC? I'm guessing that a legal reassignment would transfer the rights of HDC to the check cashing company, but I hadn't thought of it that way.

Something's not real clear to me...Is the general consensus that the employer would be liable to the check cashing place because 1. he issued the check and 2. the check cashing place took it in good faith? So the check cashing place sues the employer for the amount and the employer sues the ex-employee for the same amount?

It would almost seem that the check casher would go straight to the source, the ex-employee.

The stop payment doesn't protect the employer against this liability to the check casher? Wouldn't the check casher have some agreement that the ex-employee would have to sign that warrants the validity of the check to their knowledge?

Just thinking out loud.

I'm confused, too. If the employee had cashed both checks at another bank, couldn't the stopped item be returned to that bank? Why can it not be returned to the check cashing place?

I agree with you, the "fraudster" here is the ex-employee.

just thinking out loud here... could you make an arguement that the check casher was somehow put on notice IF the checks were cashed at the same time, for the same amount, with both checks marked "final paycheck" or something of that nature?

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It would almost seem that the check casher would go straight to the source, the ex-employee.

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it seems to me they tried and failed, if I read the first post right. but the employer is the maker of the check and is ultimately responsible. his remedy is to go after the ex-employee for the value of the 2nd check, which was issued only on the condition that the first was "un-cash-able."

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I'm confused, too. If the employee had cashed both checks at another bank, couldn't the stopped item be returned to that bank? Why can it not be returned to the check cashing place?

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it can be. and apparently it was. but the innocent HDC can sue for the value it paid for the instrument.

imagine a scenario where your friend asks you to deposit a check into your account and you give him the equivalent in cash. your friend moves to Zimbabwe. the check gets charged back to your account (NSF, closed acct, stop pay, whatever). you would want the ability to go after the maker of the check, wouldn't you? and you would want to be able to do it without trying to sort through the "he said she said" that your friend and the maker are going to subject you to. you just want to get what's yours and let those two fight it out.

But how does the employer keep this from happening again? The only solutions I see are (I am talking about the first check issued, not the second):

1) Give them cash and get a receipt (I don't like this. They might sue you if they get mugged in the parking lot.);

2) Wire or direct deposit the money into their account. Or the employer could get a deposit slip from the employee and make the deposit. (I like this. A wire may cost some money, but it protects the employer.);

3) Meet the employee at the bank and "help" him deposit it in his account or cash it;

4) Give the employee the check with a form for the employee to sign stating that they received the check and it is their responsibility and you will not replace it. (Of course, if you are a kind, gentle sole, if they lose the check, you could wait 6 months and then tell your bank that you do not want this stale item paid. I am not sure if they would effect a check casher's holder in due course status if they cashed the check after 6 months.)

BTW: Have you filed criminal charges against the ex-employee?

Hi Everyone- Thank you so much for your help. To answer a few of the questions posted:

1- The check was a regular (not cashiers) check.
2- The first check was not marked Stop Payment until the check cashing service sent it to my bank.
3- I have not filed charges yet but plan to if I loose the mall claims court case against me (that the check cashing service filed).
4- The check cashing service initally said they would pursue it through the x employee but had no luck and filed suit against me.

I sent a registeed letter to the x employees last known address stating what occured and suggested they contact the check cashing company/collection agency and pay. I also said I woudl sue them if I have a judgement against me for the judgement + my costs.

Thanks for eveyones help. ANy more feedback or suggestion woudl be appreciated.

Don't just sue. File charges and sue. This is a criminal matter first and foremost. However, do not threaten the criminal action while dealing with him in the civil matter. Either do it or don't. Threats of criminal action in a civil matter are not looked apon very kindly by judges and it is a serious violation for an attorney to do this. Contact your local DA today! Yes, I am a lawyer, but this is not legal advice because I do not work for you. Consider it free advice from a knowledgeable friend. Do not hesitate with your DA. It does not help your case one iota.

Two additional points:

The concept of holder-in-due-course (HIDC) is designed to shift liability to the person most able to prevent a loss. It is also designed to encourage the negotiation of instruments by protecting innocent holders. In this case, the check-cashing company is innocent of the stop payment and the fact that the check had been stopped.

One other requirement of HIDC status: the holder must have taken the instrument without notice that it was overdue. For checks, that means the check cashing company had to receive the check within 90 days of its issue date. That, by the way, has nothing to do with the so-called "stale date" of the check. It's just an arbitary time period by which a check ought to have cleared for the purpose of the HIDC definition.

The employer's liability to pay his employee is not satisfied when he tenders the paycheck. So the suggestion somewhere up the string that the employee be made to wait 6 months before receiving a replacement check won't cut it. In this case, however, delaying a couple of days before issuing the stop order and the replacement would have prevented the fraud, since the original check would have been paid by the drawee bank.

Excellent point; the employer was in the best position to prevent the fraud. However, I think posters are sympathizing with the employer b/c it did try to do the right thing and stop payment on it too, and the check cashing places were not even thought of when the HDIC rules were first promulgated. It seems like they should be seen to have some "notice" in almost every case! O.k., that comment isn't fair either, but we all know that the incidence of odd/bad/stolen checks at check cashing places is always on the high side when compared with other financial institutions.