Can a check cashing company take my payroll check from one company to cover a payroll check from a former company that had insuficient funds?

Under Article 2 of the Uniform Commercial Code, when you endorse (the UCC uses the term "indorse") a check payable to you to a third party (such as, in this case, the check casher), you guaranty that the check will be paid. If the check is return for insufficient funds, you are liable to the check casher, which is deemed a "holder in due course," for the amount of the funds you received. This indorser guaranty is the essence of why checks pass freely in our banking system. The guaranty of collection is only one of the implied guaranties you give with an indorsement. After the first check bounces, if you return to the check casher with a check from another employer and cash it, the check casher may apply the proceeds to your previous debt to it. This is a common-law right of offset. The duty to collect from your former employer is yours. They paid you with the insufficient-funds check. The check casher relied on your implied warranty (which you made by indorsing the check) that the check would be "good," and you breached that warranty when the check bounced.