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Insolvente company: Do I have to give up my salary?

2019-11-20T15:47:03.545Z


If a company goes into bankruptcy, it's a shock to employees. Their jobs are in danger, and so are their wages. What rights do employees have when they become creditors?



Out of the blue, a bankruptcy almost never comes. It starts for months or years. The situation of a company deteriorates creepingly or suddenly, orders break away, perhaps the management makes catastrophic wrong decisions. Often employees have to accept cuts and savings, there are first layoffs - all alarm signals.

If an employer has been guilty of pay for months, employees should be alert, as this usually indicates insolvency. If a company can no longer settle their bills, the bankruptcy proceedings are opened. In Germany, this happened in 2014 almost 24,000 times, with economic losses of 26 billion euros.

For the employees, the bankruptcy is a shock. Not only are they worried about their professional lives, they now also have to fight for holiday pay, unpaid overtime, and, most importantly, any outstanding salary. The risk is high. Because pay claims that existed before the opening of insolvency proceedings, are registered to the so-called insolvency table. Employees thus become insolvent creditors and are neither better nor worse off than other creditors, such as suppliers or customers of the company.

Bankruptcy - not always the end

When does a bankruptcy happen?

AP

Insolvency occurs when insolvency threatens or has occurred or the company is over-indebted. When there is no more money in the cash register, it is also known colloquially that a company is broke. The company or a creditor will then petition the District Court for insolvency proceedings under the Bankruptcy Code. Colloquially: You announce insolvency.

What are the objectives of the insolvency proceedings?

The purpose of the procedure is primarily to satisfy the creditors by utilizing the remaining assets of the company and distributing the proceeds. If all creditors are paid according to the calculated insolvency ratio, the procedure is terminated and the company deleted. In most cases, with many smaller companies, however, only so little fortune ("mass") is present that no procedure can be opened. Then the company is liquidated, that is deleted.

Why does bankruptcy not have to mean the end?

With the reform of the bankruptcy law in 1999, another goal came along, following the model of US bankruptcy law, which was the inspiration for his "Chapter 11". The standard terms bankruptcy, settlement or total enforcement (in the new federal states) were replaced by the unitary term insolvency. If the company is generally considered viable , an arrangement is made in an insolvency plan. This means that the bankruptcy does not mark the end - but is the beginning of a restructuring process in which as many jobs as possible should be preserved. The company is producing or continuing to work and is looking for investors who want to take over the company on a permanent basis.

How does the insolvency procedure work?

Because there is often a hurry, the court immediately appoints a provisional liquidator. He goes to work immediately, even before the bankruptcy proceedings are formally opened. He receives special powers and is almost boss in the house. He talks to potential investors and tries to cut costs with savings plans. Business continues as far as possible. At the same time, the insolvency administrator must try to convince the creditors of his plans; There are specially convened meetings of creditors.

Who comes into consideration as insolvency administrator?

The insolvency administrator is usually an experienced lawyer and business economist. There are not many professionals who are entrusted with this delicate task: The Association of German Insolvency Administrators (VID) claims to have only 435 members on its website. Large insolvencies have so far only been handled by a small group of insolvency administrators.

Most creditors only receive a fraction of their claims. And only after the opening of insolvency proceedings, salaries have to be paid out of the bankruptcy estate. In plain language: If there is still money in the company, employees can hope for their salary. If nothing is left, employees go out empty-handed. Then only the transition to the employment agency remains.

In the case of bankruptcy, an insolvency administrator takes the place of the employer and performs several tasks: he examines how the claims of the creditors can be satisfied. He tries to redevelop the company, to save it in whole or in part - even by selling parts of the business, land or machinery. He is looking for investors to continue production and to get as many jobs as possible.

And what will happen to the workplace?

Due to a company failure, an employment does not end automatically, but must be terminated by the insolvency administrator. He has to observe a notice period of a maximum of three months. If laws, collective agreements or employment contracts provide for longer periods, they will be shortened. In contrast, shorter notice periods also apply in insolvency proceedings.

In principle, in the case of insolvency, the normal rules apply, for example, to the Protection against dismissal law, although it is easier and faster because there is usually a need for haste. For example, the usual social selection based on length of service, age and maintenance obligations can only be checked for gross errors if the insolvency administrator and the works council agree on reconciliation of interests with the list of names. In addition, the insolvency administrator can create a "balanced personnel structure".

Of course, employees can cancel themselves, even without notice, for example because of open pay claims. Anyone who plans this should have asked the employer in advance for salary payment (in writing with deadline), wait for at least one outstanding monthly salary and if possible already have a subsequent employment relationship.

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Causes of termination: Here you are fired

If an insolvent employer does not pay the agreed wage, the employee has a right of retention of his work. In short: no money, no work. If the employer releases employees, they may receive unemployment benefits. Anyone who has been waiting for months for salary, can cancel properly or without notice, without him then with the employment agency a blocking period of three months.

In these cases, the Employment Agency pays but initially no unemployment benefits, but an insolvency allowance; advances are also possible. The prerequisites: The insolvency proceedings were opened, they were dismissed for lack of assets or the company ceased operations; In addition, the employee has applied for bankruptcy money.

The insolvency allowance covers the last three months' salary before the insolvency proceedings are opened. Subsequently, employees can apply for unemployment benefits. In addition to the full net salary, the insolvency allowance also includes annual extra payments.

Important: You have to file the application within two months of the bankruptcy event. Sometimes, an employee can not help knowing that he did not know the exact time. Then a grace period of another two months can take effect - but workers should not rely on it, otherwise they risk their claim.

  • Important judgments and their consequences

The employer of a mail order buyer went bankrupt. In 2010, she was dismissed while she was on parental leave. After the contractually agreed notice period, the employment relationship would have been terminated later. The employee was no longer able to insure herself and her children with non-contributory health insurance because the insolvency administrator shortened the notice period. The Federal Labor Court ruled: The maximum of three months is binding, the action was unsuccessful (judgment of 27 February 2014, file number 6 AZR 301/12).

A production worker was 51 years old, exactly the same as the average age of the workforce when insolvency proceedings were opened in 2011 through his employer. In a mass dismissal, he received a redundancy notice and resisted because he considered the social selection to be arbitrary and grossly flawed; older employees would be disadvantaged. The insolvency administrator had formed age groups to create a balanced age structure. A rejuvenation had been urgently needed operationally and made the sale of the company only possible.

The Federal Labor Court ruled that the formation of age groups did not violate the prohibition of age discrimination if it served the legitimate purpose of corporate restructuring. However, the BAG dismissed the case for renegotiation to the Nuremberg Land Labor Court, which was to review the social selection (judgment of 19 December 2013, file number 6 AZR 790/12).

  • This is advised by Ina Koplin, specialist lawyer for employment law

If a company is insolvent and insolvency proceedings occur, employees usually have open salary claims. Before the bankruptcy, employees are so-called insolvency creditors and then mass creditors. Who wants to assert his claim, must contact the insolvency administrator. Since employees often receive only part of the money they are entitled to, they should report in parallel to the employment office.

Source: spiegel

All business articles on 2019-11-20

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