By Cecily Barnes
Staff Writer, CNET News.com
November 2, 2000, 4:00 a.m. PT

Maggie Pace was nearly seven months pregnant when the start-up where she worked, Vox.com, lost its venture capital and shut its doors.

But Pace was relatively lucky. Cybergold, which had funded Vox and operated out of the same building in Oakland, Calif., agreed to hire Pace and pay for her maternity leave. Furthermore, Vox was able to pay the final paychecks of all its employees, including accrued vacation pay.

"Nobody got stiffed," she said.

Pace's tale ended on a positive note, but her initial anxiety is being experienced by thousands of dot-com workers as the go-go days of the late 1990s are supplanted by a new sense of fiscal sobriety. Although they represent only a small fraction of the overall tech work force, layoffs are becoming more common as new companies cut costs or close altogether.

Laid-off employees in many other industries--from autoworkers to bank tellers--have long faced questions about medical coverage and 401(k) plans. But the issues facing laid-off dot-commers are often unique, as many are working their first jobs at small start-ups with no union protection and unclear rights under the law.

In many cases, the company has filed for bankruptcy protection or has simply locked its doors. That could leave former employees among a long list creditors--but instead of being owed money for chairs or desks, they would be owed a final paycheck, unused vacation time or overtime payments.

So just what rights do fired employees have, and where can they go for help?

The basic benefit, unemployment insurance, is available to all employees who have worked for a certain amount of time depending upon the state. To be eligible, the employee must have been laid off through no fault of his or her own.

Still, though the checks can help buy groceries and pay rent, unemployment insurance offers little to those making more than $30,000 a year, as most in the high-tech industry do.

The payments are based on a percentage of earnings during the past 52 weeks, up to a maximum set by the state. In California, this maximum tops out at $230 a week, or about $920 per month. This applies to people who earn more than $7,634 in their highest-grossing quarter, or the equivalent of $30,536 annually. Anyone earning more, regardless of the amount, will receive this same top-level compensation.

As for health benefits, a federal law dubbed COBRA (The Consolidated Omnibus Budget Reconciliation Act) allows most people to continue the medical coverage they had at their company if they make the full payments.

But COBRA generally covers companies that have insured at least 20 employees in the past year. If a company has insured fewer than 20 workers, it may not fall under the law's protection. In this scenario, an individual's only options would be to pay for an expensive individual health plan or apply for government-funded health coverage.

"If the policy had been an insured policy, they may have some rights. If it was uninsured, they may not," said John Jacobsen, an employee benefits attorney and partner with the Illinois-based firm Vedder Price. Employees are advised to check with the employer on the type of coverage--insured or uninsured--before any signs of fiscal stress.

Collecting unpaid wages--a possibility when companies file for bankruptcy protection or shut down--is even trickier.

In the case of a company that files for bankruptcy, unpaid employees must contact the court and ask to be added to a list of creditors. Unfortunately, employees are considered unsecured creditors and can be paid only after a potentially long list of secured creditors receive their money.

The odds of collecting owed wages depend on the amount of assets the company lists in the bankruptcy filing and the amount of its debts. In most situations, the debts exceed the assets--leaving little left for employees after the secured creditors have been paid.

If the company essentially disappears, "then the employee would have to hire an attorney and sue," said attorney Nina Stillman, another partner at Vetter Price. However, it may not be easy to find a lawyer willing to track down a few hundred or thousand dollars in lost pay.

Many employees sign up for their companies' 401(k) plans, which take pretax money out of each paycheck and set it aside in a retirement account that a trustee invests.

Some companies will match part or all of their employees' contributions. These matching funds are federally protected under the Employee Retirement Income Security Act (ERISA). Even if a company declares bankruptcy and has no assets, this money should be safe and in a protected trust, handled by either a bank or an individual. The terminated employee must contact the trustee and have the account either rolled over to a new company or placed in an Individual Retirement Account (IRA).

"You have rights against the trustee if they have terribly invested the money or stolen the money," Jacobsen noted.

Many women continue their jobs until their ninth month of pregnancy and then take paid leave. States pay a portion of the woman's salary during leave under temporary disability laws, and many companies make up the difference, resulting in a full paycheck for new mothers.

But if the woman is laid off, not only is the company unlikely to subsidize her leave, but the state will not make disability payments because she is no longer employed. Then, Stillman said, the woman's only option is to file for unemployment benefits, which would usually amount to considerably less than her subsidized maternity leave.

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