The insolvency of a company is a difficult situation for everyone involved, but employees in particular are often confronted with existential fears. The loss of a job, non-payment of wages and uncertainty about the future are just some of the challenges that such a crisis brings with it. This makes it all the more important to be fully aware of the rights of employees in a company insolvency and to seek expert help if necessary. This article provides a comprehensive analysis of the key factors influencing the consequences of corporate insolvency and highlights the most important aspects of employment law in this context.
When the employer gets into difficulties
Corporate insolvency occurs when a company is insolvent or is threatened with over-indebtedness. The aim of insolvency proceedings is to satisfy a company's creditors as best as possible. This is done either by restructuring the company or by liquidating it and selling its assets. For employees, the opening of insolvency proceedings often means a turning point, as the previous employer's ability to act is severely restricted. A court-appointed insolvency administrator takes control of the company and decides on its future fate. The employment relationships generally remain in place, but can be terminated by the insolvency administrator under certain conditions. The statutory regulations on protection against dismissal play a decisive role here.
The role of the insolvency administrator and the termination of employment relationships
When insolvency proceedings are opened, the power to manage and dispose of the company's assets is transferred to the insolvency administrator. The administrator is not only responsible for satisfying the creditors, but must also take the interests of the employees into account. One of the insolvency administrator's first tasks is often to review the personnel situation and, if necessary, introduce measures to reduce costs. This also includes the possibility of terminating employment relationships.
Special features of termination in insolvency proceedings
In the event of insolvency, special regulations apply to the termination of employment relationships, which may deviate from the general provisions on protection against dismissal. In accordance with Section 113 of the German Insolvency Code (InsO), the insolvency administrator can terminate employment relationships with three months' notice to the end of the month, irrespective of longer contractual or collectively agreed notice periods. This serves to enable the insolvency administrator to quickly restructure or liquidate the company. However, the notice of termination must be effective and meet the general requirements of protection against dismissal, provided that the Dismissal Protection Act (KSchG) applies.
Dismissal for operational reasons and social selection
In many cases, dismissals in insolvency proceedings are to be qualified as operational. This means that the dismissal is due to urgent operational requirements that prevent the continued employment of the employee. This could be, for example, rationalization measures, the closure of parts of the business or the general inefficiency of the business. In the event of dismissal for operational reasons, the insolvency administrator must generally carry out a social selection in accordance with Section 1 (3) KSchG, unless the business is completely shut down. In the social selection, criteria such as length of service, age, maintenance obligations and severe disability of the employee must be taken into account. It is advisable to have the legality of such a dismissal examined by a specialist employment lawyer.
Wages and salaries in insolvency: insolvency money as a lifeline
One of the most pressing issues for employees in insolvency is securing their wage claims. Wages have often not been paid before insolvency proceedings are opened. This is where insolvency money comes into play, which is an important safeguard for employees.
Entitlement to insolvency money
Employees are entitled to insolvency money if their employer has become insolvent and they still have outstanding wage or salary claims for the period prior to the opening of insolvency proceedings. Insolvency benefit is paid by the employment agency and generally covers the outstanding net wages for the last three months prior to the opening of insolvency proceedings. It is important to submit the application for insolvency money in good time, usually within two months of the opening of insolvency proceedings. A lawyer can assist with the application and the enforcement of these claims.
Insolvency claims and default money
Special regulations apply to wage and salary claims that arise after the opening of insolvency proceedings. These are referred to as debts of the estate and have priority over the creditors' "old" insolvency claims in the insolvency proceedings. This means that wages and salaries earned during the insolvency proceedings must generally be paid by the insolvency administrator from the insolvency estate. However, if these payments are not made, there may be a claim to compensation for loss of earnings, although this is less common than insolvency money.
Compensation claims: a possible form of compensation
In the event of dismissal for operational reasons as part of a company insolvency, the question of severance pay often arises. In Germany, there is no general statutory entitlement to severance pay in the event of dismissal, unless this is regulated by contract, collective agreement or a social plan.
Severance pay and social plan
In many cases, a social plan is negotiated between the insolvency administrator and the works council during insolvency proceedings. A social plan is intended to compensate for or mitigate the economic disadvantages suffered by employees as a result of operational changes. This can include the payment of severance pay. The amount of the severance payment depends on various factors, such as the length of service, the age of the employee and the severity of the economic disadvantages. A lawyer specializing in employment law can check whether an employee is entitled to severance pay and support the negotiations as part of a social compensation plan.
Waiver of dismissal protection action in return for severance pay
Another way to receive a severance payment is to agree a severance payment in return for waiving an action for unfair dismissal. This can be an option for employees if they want clarity about their financial situation quickly and want to avoid the risk of lengthy legal proceedings. However, it is essential to only sign such an agreement after consulting a lawyer to ensure that the terms are fair and the employee's interests are protected.
Works council and employee representation in insolvency
The works council also plays an important role in corporate insolvency and continues to have information, consultation and co-determination rights. It is an important point of contact for employees and represents their interests vis-à-vis the insolvency administrator.
Participation rights of the works council
The insolvency administrator is obliged to inform the works council of all relevant information concerning the employees, in particular about planned redundancies or operational changes. The works council has a right of co-determination when drawing up a social compensation plan and can conduct negotiations on its content. Cooperation between the works council and the insolvency administrator is crucial in order to find the best possible solutions for the employees.
Information and support for employees
The works council can provide employees with important information about their rights in insolvency and support them in applying for insolvency benefits. The works council can also be a first point of contact for questions regarding dismissal or severance pay claims. However, it is important to note that the works council cannot provide legal advice in individual cases.
Conclusion: Navigating through insolvency with support
The insolvency of a company is an extremely stressful situation for employees. Nevertheless, it is extremely important to know your own rights as an employee and to take action. From checking the validity of a dismissal to securing wages through insolvency benefits and negotiating severance pay claims - sound knowledge of employment law and often professional support are essential at every step. An experienced employment lawyer can help to understand the complex legal regulations, meet deadlines and achieve the best possible results for employees. Acting early and seeking qualified legal advice is key to mitigating the negative consequences of corporate insolvency as much as possible and finding new career prospects.
