The insolvency of an employer raises many questions for employees. One particularly important one concerns severance pay. A recent report shows that under certain circumstances, a severance pay of 35,000 euros can be retained. But which factor is crucial here? And how does insolvency affect your claims? In this article, we’ll clarify when protected severance pay is protected and what you need to watch out for.
Protected Severance Pay: When Payments in Insolvency Are Secure?
Severance pay in insolvency may be protected under certain circumstances. What matters is whether the severance pay was already promised or agreed upon before insolvency. If the severance pay is already fixed, it can be treated as a so-called mass claim, meaning it can be paid in advance. However, this depends on the specific situation.
Another important factor is the timing of the termination. If the termination was made before insolvency, claims for protected severance pay may be easier to enforce. Severance pay in large corporations can serve as a good example of how negotiations proceed in such cases.
The Insolvency of an Employer: What Does This Mean for Existing Employment Relationships?
When a company becomes insolvent, it does not automatically mean the end of all employment relationships. However, significant changes can occur. Often, employment relationships are terminated due to operational reasons. But even in insolvency, employees have certain rights. It is important to clarify your claims early to avoid missing deadlines.
In insolvency, the company’s assets are used to satisfy creditors. This means that payments such as severance pay are not always guaranteed. However, there are exceptions that we will explain in more detail below.
The Debtor Principle in Severance Pay: What 35,000 Euros Mean
The debtor principle states that the debtor (in this case, the insolvent employer) is liable for the debts. This means that severance pay can only be paid if there are still sufficient funds in the company. If 35,000 euros are considered protected, this means they are prioritized over other creditors.
However, this is not automatically the case. It depends on whether the severance pay is classified as a mass claim or an insolvency claim. A mass claim has priority, while an insolvency claim only gives a claim to a portion of the insolvency estate.
The Critical Factor: The Timing of Insolvency and Termination
The timing of insolvency relative to termination is crucial for your claims. If the termination was made before insolvency, you have a better chance of receiving protected severance pay. In this case, the severance pay can be treated as a mass claim, ensuring its payment.
However, if the termination occurs after insolvency, the severance pay is classified as an insolvency claim. This means you will only receive a portion of the amount, if anything. In any case, you should keep an eye on the three-week deadline for a protection against termination claim to avoid endangering your claims.
How Insolvency Affects Your Claim to Unemployment Benefit (Citizens’ Income)
The insolvency of your employer can also affect your claim to unemployment benefit. Basically, you are entitled to unemployment benefit if you are unemployed and looking for a new job. However, the insolvency of your employer can influence the timing of your unemployment.
If you receive severance pay, this can affect your unemployment benefit. For example, a severance pay for incapacity for work may be considered income, which affects the amount of unemployment benefit. It is therefore advisable to inform yourself early about the possible effects.
Your Rights as an Employee in the Event of a Threatened or Existing Insolvency of Your Employer
As an employee, you have certain rights even in the event of a threatened or existing insolvency of your employer. It is important to inform yourself about your claims and assert them early. These include, among others:
- Severance pay claims
- Pensions from occupational pension schemes
- Claims to unemployment benefit
- Claims to accrued vacation and overtime
It is advisable to consult a labor law attorney to fully assert your rights.
Finding Professional Support: When a Labor Law Attorney Is Advisable
In cases of insolvency and severance pay, professional support is often essential. A labor law attorney can help you clarify your claims and enforce them. This is particularly important when dealing with complex issues such as classifying severance pay as a mass claim or an insolvency claim.
RechtStark offers the possibility to check the financing of such a procedure. This way, you can enforce your claims even if you lack the financial means. Consult us and secure your rights.
Fazit: The insolvency of an employer presents employees with many challenges. But with the right strategy and professional support, you can secure your claims to severance pay and unemployment benefit. Inform yourself early and seek advice to avoid missing important deadlines.
Note: This article is for general information purposes only and does not replace individual legal advice. For a free initial assessment of whether litigation funding may be an option for your case, you can contact RechtStark.