The Chattanooga accounting firm Croft & Frost abruptly laid off all of its employees Tuesday after struggling for months to meet payroll.
Several emails obtained by the Chattanooga Times Free Press show a period stretching between late May to the present in which the company was continually failing to pay employees on time, even as its CEO Jonathan Frost and other leaders assured staff the future was bright.
This culminated Tuesday when the firm dismissed all employees, still owing them pay dating back to early August.
"Due to the ongoing challenges and decline in our company's financial performance, I regret to inform you that we have made the difficult decision to implement an immediate workforce reduction, which unfortunately includes the termination of employment for all employees, effective immediately," a human resources staffer told employees in an email Tuesday.
Some workers from the firm have contacted the state. The Tennessee Department of Labor received three wage complaints from Croft & Frost CPA employees, said Chris Cannon, the agency's spokesperson, in an email Thursday. But he said the agency must wait for a period to begin the wage claim process so the company has time to compensate the employees.
"Unit staff will first work with the employer to ensure the employees are paid," Cannon said. "If that does not occur, staff will start an investigation into the matter."
Some payment may be coming soon. In a pair of emails Thursday afternoon, a human resources staffer told staff the unpaid Aug. 11 and 25 and Sept. 8 paychecks had been funded and the now-former employees could expect to receive their pay via direct deposit Friday. The staffer also said a final paycheck for an abridged final pay period would be paid out later, but workers would not be receiving long-promised reimbursements for work expenses and bonus funds.
CEO Jonathan Frost comes from a family of CPAs. His grandfather, Jack Frost, founded the accounting firm of Frost & Frost and later started the carpet equipment maker Tuftco in Chattanooga.
Jonathan Frost started his downtown accounting firm in 2010 and it eventually became Croft & Frost, joining with another office in Chicago run by a businessman named Paul Croft.
The two men are also listed as founders of an organization called Rhino Onward International, with an address in Chicago, which describes itself as a developer and a manufacturer of green energy solutions.
Frost did not respond to phone calls and text messages Thursday, and no one answered the door when a reporter visited two houses listed under his name. The office of the CPA firm on the top floor of the office building at 1413 Chestnut Street was locked this week.
Croft did not respond to a direct message on his LinkedIn account seeking comment.
Trouble showed at Croft & Frost as early as May, when an email to employees attributed to Jonathan Frost said the business had faced a "perfect storm" amid the addition of 36 staff, several product lines and new executive leadership among many other complex business initiatives.
"When we make these changes as rapidly as we have, that will create a significant drain on cash flow," the email said. "We will see more of the fruits of these changes over the next 6-12 months. Until then, we need to hold on and double down on our belief that we are moving in the right direction."
Two days later, the CEO again reached out to employees. There had been talk about the company not being able to pay workers as scheduled the next day, he said, assuring them that he was doing everything in his power to make sure they were paid on time.
"There may be a slight delay on the payroll," he said. "The only thing that can be guaranteed is that you will absolutely be compensated for all work performed, it may just be a few days late."
He added that if paychecks were late everyone would get a bonus "as a sign of good faith."
The paychecks were indeed late, emails show. The bonus was never paid.
Over the next three-plus months, employees of Croft & Frost received email after email pledging transparency, saying that ever-later paychecks would reach them at last — and that the company would make it through.
"As I am sure you have noticed, payroll today is delayed further," said an email from Jonathan Frost on June 3. "However I believe we will have the funding next week and payroll will be released then."
A few days later, on June 9, he sent an update.
"We will not be receiving payroll today," he said.
But he said two pay periods, plus that bonus, would be paid out the next week as soon as the funds were secured.
Payroll problems persisted into the next month.
"I am writing to provide a clear and transparent update on payroll, for 7/14 and 7/28," the human resources staffer wrote in late July. "As you may know, we had anticipated receiving significant funds this week to cover several payrolls and stabilize our financial position. However, due to an unforeseen delay, we have yet to receive these funds. Let me assure you, the funds are coming. This situation is unfortunately beyond my control, as timing is everything with the amount of moving parts we have currently to get this fixed."
The situation was temporary, and the company's prospects remained good, the staffer assured employees. Still, the pay delays continued.
By Aug. 25 — a payday — the HR staffer told employees that the company still lacked the money to pay them for July 28, Aug. 11 and Aug. 25 because they were still waiting for a deal to close.
On Sept. 8, employees received another email.
"I want to acknowledge that today is a payday," the staffer told them. "Please rest assured that I have the 8/11, 8/25, and now 9/8 payrolls ready to go as soon as the funds become available."
A few days later, on Tuesday, employees — owed more than three paychecks — were informed they were laid off. On Thursday, they were told they would be getting most of what they were owed — but not all of it.
"I have received a few questions about the 'special payroll' that was supposed to contain the 10% bonus + Memorial Day holiday retro pay + May expense reimbursements," the human resources staffer said. "At this time we should not expect to receive those funds. The reality is, those funds were over-promised when the money to fund that payroll is not available. Jonathan is not intentionally withholding that paycheck from us, but rather Jonathan does not have the funds to make that supplemental payroll. I understand this is upsetting news. But I hope you understand given our circumstances."
Contact Dave Flessner at [email protected] or 423-757-6340.