When a company becomes insolvent, the insolvency benefit repeated insolvency is the last resort for many employees. The staff at Galeria are currently experiencing such a special case: despite a long history of insolvency proceedings, they may be able to claim insolvency benefit again. This article explains what that means and what affected employees need to watch out for now.
The term “serial insolvency” is not a legal term of art, but it accurately captures what many employees feel when their employer slides from one insolvency proceeding into the next over a period of years. For the workforce, the question then becomes: will I get my wages at all? And if not – who steps in?
Insolvency Benefit in Repeated Insolvency: What the Special Case Means for Galeria
The good news first: insolvency benefit is not a payment from the employer, but a social benefit provided by the Federal Employment Agency. It secures a portion of employees’ income when the employer can no longer pay due to insolvency. The special case at Galeria shows that new claims can arise even in a serial insolvency situation – namely when a new insolvency event occurs.
Many people assume that if the employer has already been insolvent once, there will be no insolvency benefit later. That is a misunderstanding. The law ties the claim not to the person of the employer, but to the individual insolvency event. Even in a serial insolvency, insolvency benefit can arise anew if a new insolvency event occurs. That is the core of the special case currently affecting many Galeria employees.
Who Is Entitled to Insolvency Benefit?
Employees who are still in an employment relationship when an insolvency event occurs and who have outstanding wage claims for the last three months before that event are entitled to insolvency benefit. The insolvency event is the legal trigger – for example, the opening of insolvency proceedings, the dismissal of the petition for lack of assets, or the appointment of a provisional insolvency administrator with disposal restrictions.
The Employment Agency generally pays the net remuneration for this three-month period. It concerns the working income that the employer actually failed to pay – i.e., the wages for the last three months before the insolvency event. Importantly, it does not matter whether the company has been unable to pay for months or years. The decisive factor is the specific insolvency event.
An example: if a new proceeding is opened after a completed insolvency proceeding because the company has become insolvent again, a new entitlement period can arise for the employees still employed at that time. The prerequisite is that they remain in an employment relationship and have outstanding wage claims.
Serial Insolvency: Why the Situation of Galeria Employees Is Particular
The particularity at Galeria lies in the sequence of several insolvency proceedings. For the employees, this means: they must examine carefully whether a new insolvency event has occurred and whether their employment relationship still existed at the relevant time. That sounds trivial, but in practice it is often the decisive question.
In addition, in an insolvency proceeding the insolvency administrator may terminate employment relationships with a notice period of three months to the end of the month, even if the employment contract provides for a longer notice period. This special rule means that many employees lose their jobs during the proceeding. Anyone who then still has outstanding wage claims can claim insolvency benefit – but only for the period up to the termination of the employment relationship.
It is precisely this constellation that makes the special case for the Galeria workforce so particular. The claim to insolvency benefit repeated insolvency is not a one-off matter; it can arise anew with each new insolvency event. Anyone who assumes that no further insolvency benefit will be paid after a first insolvency may inadvertently forfeit money to which they are entitled.
Applying for Insolvency Benefit: How Employees Proceed
The application for insolvency benefit is handled through the Employment Agency. As a rule, the employer or the insolvency administrator issues an insolvency benefit certificate. This certificate forms the basis for calculating the claim. It contains details of your working income and the outstanding amounts.
You should submit the application as early as possible. A statutory exclusion period of two months after the insolvency event applies. If this deadline is missed, the claim may be lost. Attach your employment contract, the most recent payslips, and if possible the insolvency benefit certificate to the application.
If the employer does not cooperate, you should contact the competent Employment Agency directly. The authority can, if necessary, request the required information from the insolvency administrator. The important thing is not to wait until all documents are perfect. Even an incomplete application can secure the claim as long as the deadline is met. Payment is generally made directly by the Employment Agency to your account – you do not need to worry that the insolvency administrator will withhold the money.
Insolvency Benefit and Severance Pay: What Is the Difference?
Insolvency benefit is not severance pay. It replaces wages that you did not receive for work already performed. Severance pay, by contrast, is compensation for the loss of the job. It is not paid by the Employment Agency, but by the employer – or in insolvency proceedings by the insolvency administrator.
In insolvency proceedings, severance payments are often only partially disbursed because they are not covered by insolvency benefit. Whether and to what extent severance is paid depends on the specific proceeding and the insolvency quota. An overview of the basics is provided in our guide to severance pay after dismissal.
Anyone who wants to enforce a due severance payment should seek advice on the prospects of success at an early stage. Even if the employer is insolvent, the route via the labor court can be worthwhile – for example, to have the claim established. Read more in our article enforcing immediate severance payment.
What Happens After the Insolvency Benefit Period
Insolvency benefit generally covers three months. What comes next depends on the further course of the insolvency proceeding. If the business continues, the employer resumes paying the agreed salary from the following month. If the business is shut down, dismissals loom.
If you receive a notice of termination, you must absolutely observe the deadline for a dismissal protection action: it is three weeks after receipt of the notice. The general rules of dismissal protection apply even in insolvency proceedings, even though the insolvency administrator acts as the employer. More on this in our guide to dismissal protection action.
Anyone simultaneously looking for a new job should also consider the interactions with acceptance delay. If the employer does not accept work after an invalid dismissal, they continue to owe the salary – which can be an important financial bridge alongside insolvency benefit. More on this in our article dismissal protection action and new job: what employees must consider when job hunting and facing acceptance delay.
In operational dismissals during insolvency proceedings, the insolvency administrator must also observe the principles of social selection, provided the Dismissal Protection Act applies. Length of service, age, and maintenance obligations are then important criteria. Anyone who suspects that the social selection is flawed should have this examined within the framework of a dismissal protection action.
Additionally, a transfer agency may play a role. It is sometimes set up to take on employees after a business closure and retrain them. Whether this happens in an individual case depends on the insolvency administrator and the financial possibilities.
Legal Support: When a Specialist Lawyer Is Worthwhile
Not every insolvency case requires a lawyer. If the employer issues the insolvency benefit certificate and the Employment Agency pays promptly, you can file the application on your own. It becomes complicated when the certificate is not forthcoming, the amount of insolvency benefit is miscalculated, or a dismissal arrives at the same time.
Especially in the event of a dismissal during insolvency proceedings, you should seek advice early from an independent specialist lawyer for labor law. The same applies if you wish to negotiate severance pay. A dismissal protection action initially costs money that many cannot advance. This is where litigation funding can help: RechtStark acts as a litigation funder and examines whether it will cover the costs of such proceedings – but the representation itself always lies with your own lawyer.
Anyone who is unsure whether they have a claim to insolvency benefit in repeated insolvency should have this clarified before deadlines are missed. The Galeria special case shows: even in a serial insolvency, insolvency benefit is an important protection for employees. The key is knowing the insolvency event, meeting the deadlines, and getting help in good time when questions arise. Those who know their rights can set the right course even in a difficult economic situation.
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.