The severance pay insolvency issue at battery manufacturer Varta is causing great uncertainty among employees. When a company enters insolvency, operational dismissals, settlement agreements, and the question of severance pay often arise. For employees, it is now crucial to know their rights and not miss deadlines. This article provides a detailed overview of the most important points you should consider now.
Severance Pay Insolvency: What Insolvency Means for Your Employment Relationship
An employer’s insolvency does not automatically end the employment relationship. The insolvency administrator takes over the employer’s functions and decides whether the business will continue, be restructured, or be shut down. During this phase, the standard dismissal protection rules continue to apply – with some special provisions. For example, the insolvency administrator may terminate employment under eased conditions if this is necessary for restructuring. Nevertheless, social considerations must be taken into account and notice periods observed. Anyone who receives a dismissal should not simply accept it, but have it reviewed to see whether it is legally sound. Severance pay in insolvency often plays a central role, as many settlements are reached in this phase.
Dismissal Protection Lawsuit: The Three-Week Deadline
You can only challenge a dismissal by filing a lawsuit at the labor court within three weeks of receiving the notice. This deadline is a preclusion period – if you miss it, the dismissal becomes effective even if it would otherwise be invalid. In insolvency situations, employers often try to establish facts quickly. Do not let yourself be pressured; act promptly. A receiving a dismissal – what now? is the first step to secure your position. Even if the business is shut down, a dismissal can be invalid if the social selection is flawed or the works council was not properly involved. Severance pay is often negotiated in the context of such proceedings in insolvency cases. Understanding severance pay insolvency is essential when considering a dismissal protection lawsuit.
Severance Pay in Insolvency: Not Automatic, but a Matter of Negotiation
A common misconception: there is no severance pay in insolvency. In fact, there is no statutory entitlement to severance pay – neither in the normal case nor in insolvency. However, in practice many dismissal protection proceedings end with a settlement that includes severance pay. The insolvency administrator often has an interest in quickly ending employment relationships to save costs. This creates room for negotiation. The amount of severance pay is often based on the rule of thumb: 0.5 to 1.0 gross monthly salaries per year of employment. In insolvency cases, the scope can shift downward, but here too it holds: those who negotiate well or are represented by an attorney often achieve significantly more. Severance pay insolvency should therefore always be part of your negotiation strategy.
Settlement Agreement: A Hasty Signature Can Be Costly
The insolvency administrator will likely offer you a settlement agreement. By signing it, you bypass the dismissal protection process, but you also waive important rights. A settlement agreement usually results in a waiting period for unemployment benefits of up to twelve weeks, because you have voluntarily caused the termination of the employment relationship. The Federal Employment Agency examines carefully whether there was an important reason for giving up the job. In insolvency, such a reason is often recognized, but not automatically. Have any settlement agreement reviewed by an attorney before you sign. Pay particular attention to: the amount of severance pay, release from work, reference wording, assumption of remaining vacation and overtime, and the exclusion of the waiting period through an appropriate formulation. Here too, severance pay in insolvency can be a decisive negotiating point.
Insolvency Benefits: When the Employer Can No Longer Pay
If the employer no longer pays wages or salaries, the Federal Employment Agency steps in with insolvency benefits. It covers the last three months before the opening of the insolvency proceedings (or before the filing, if the proceedings are dismissed for lack of assets). Insolvency benefits must be applied for with the insolvency administrator or directly with the agency – deadline: two months after the opening of the proceedings. Important: insolvency benefits secure only the ongoing wage, not severance pay. If you want to enforce severance pay, you must go the legal route. More details can be found in our article on insolvency benefits, dismissal, and dismissal protection lawsuit. The claim to severance pay remains independent of the claim to insolvency benefits.
Works Council and Social Plan: Your Additional Leverage
If a works council exists in the company, it has strong co-determination rights in cases of mass layoffs and plant closures. The works council must negotiate a social plan that governs severance payments, relocation costs, qualification measures, and hardship provisions. In insolvency, the scope for social plans is often narrower because the estate is limited. Nevertheless, it is worthwhile to involve the works council early on. It can also create a name list for the social plan and insist that the selection criteria be transparent and socially acceptable. If there is no works council, as an individual you can only enforce your rights through a dismissal protection lawsuit and the settlement route. Severance pay in insolvency can also be anchored in the social plan.
Typical Pitfalls in Insolvency – and How to Avoid Them
In practice, we repeatedly see the same mistakes: the three‑week lawsuit deadline is missed because those affected hope for a “friendly settlement.” Settlement agreements are signed without checking the consequences for the waiting period. Ancillary claims such as overtime, accrued vacation, or Christmas bonuses are “forgotten” in the settlement because the focus lies solely on severance pay. And: the two‑month deadline for insolvency benefits is missed. Our advice: document everything in writing. Keep all letters from the insolvency administrator. Note conversations promptly. And seek legal counsel early – ideally before you sign any document. Severance pay in an insolvency proceeding should never be viewed in isolation, but as part of the total package of claims.
What to Do Now: Your Concrete Action Plan
- Received a dismissal? Note the date of receipt. The three‑week lawsuit deadline starts with receipt, not with the date on the letter.
- Settlement agreement presented? Do not sign immediately. Have it reviewed – especially regarding severance amount, waiting period, release from work, and reference.
- Loss of income? Apply for insolvency benefits in a timely manner (two months after the opening of the proceedings).
- Contact the works council: Ask about the social plan, the name list, and advisory services.
- Engage an attorney: An employment‑law attorney reviews the dismissal, negotiates the severance pay, and secures your ancillary claims.
Important note: This article provides general information and does not substitute for legal advice in individual cases. The content presented is not a binding legal assessment of your personal situation. For a free initial assessment of whether litigation funding might be suitable for your case, you can contact RechtStark.
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.