Employer bankrupt: what workers can do now

It is a situation in which no employee wants to find themselves, but unfortunately, time and again becomes reality: they learn that your employer is insolvent and this bankruptcy has already officially registered or is about to. Before there were first signs, rumors in the job or - in large companies - maybe news of a crisis. With the certainty that the employer is insolvent, the insecurity hits many employees like a blow. Suddenly, big changes are coming up and so many questions in the room: what's next? What do I have to do? What rights and obligations do I have? What are my claims against an insolvent employer? We answer the most important and frequently asked questions about employer insolvency ...

Employer insolvent: what does that mean anyway?
Most employers only know that a company is filing for bankruptcy if a major corporation or a well-known employer becomes insolvent. For example, it is currently the case with the Germania airline , which has not gotten out of financial difficulties and is now initiating insolvency proceedings.

Hardly anyone believes that he himself could be affected by an employer's bankruptcy until the emergency actually occurs. The first question of many employees is therefore: What does it mean, if the employer is insolvent?

In short, a bankruptcy of the employer means that he or she is insolvent and thus no longer has the financial means to meet their obligations. These include, of course, the salaries of employees, but also many other cost factors such as rent, invoices from suppliers or ongoing business costs. Bankruptcy proceedings can be opened if insolvency has already occurred or a company is acutely threatened.


When this point is reached, a series of questions arise for employees. We have listed and answered these for you in our employer insolvency FAQ .


Questions and Answers: What to do if the employer is insolvent?
Does the employer have to inform about the bankruptcy?
The insolvency of an employer can never be secret or carried out. If it comes to the critical point where solvency can no longer be maintained and insolvency proceedings are opened, the company has an obligation to inform the entire workforce. If the employer becomes insolvent, he must inform all employees immediately after the opening of the insolvency proceedings.

Depending on the size and structure of the company, there are two options: If there is a works council, this can be informed about the bankruptcy. If there is no such thing, all employees are to be informed about the bankruptcy.

Are employees terminated by bankruptcy?
Here is the answer: No , if your employer is insolvent, you will not be automatically terminated and your employment relationship initially continues. It is also important that the bankruptcy itself is not a legitimate reason for termination . Due to ongoing insolvency proceedings, you will not lose your employment - at least for the time being.

In practice, insolvency is often accompanied by the complete closure of a company or at least part of its business. This may then justify an operational termination if certain conditions are met. For example, there should not be another free job that you could be placed on.

Also read:
Termination : reasons and reaction

How long is the notice period in case of insolvency?
Until the insolvency occurs, the statutory notice periods or (if lawful) the individual agreements between employee and company apply. If the employer becomes insolvent, however, from the opening of insolvency proceedings, a special regulation will be used, which replaces possible longer notice periods.

This separate notice period is recorded in § 113 of the Insolvency Act (InsO) . It states: The period of notice is three months to the end of the month, unless a shorter deadline is decisive - for example , if a term of less than three months is agreed in the employment contract, this will continue to apply. Longer deadlines are, however, reduced to three months.

Also read:
Notice periods : examples, information, tips

Do I have to continue to work in case of insolvency?
Anyone who believes that he no longer has to go to work from the time the bankruptcy is opened is wrong. As already explained, the employment relationship will continue for the time being. Thus, you are even obliged to continue your work as the employment contract and the agreements made in it are still valid. Only when you are officially released from your job will that change.

On the other hand, it is not only a duty, but also your right to continue to be employed if your employer is insolvent. While your employment continues, you will eventually be entitled to a salary. So you acquire claims against the insolvent employer, which you (under certain circumstances) can claim.

What should I do if the employer does not pay salary?
The insolvency of the employer usually means that the salaries of employees can no longer (or at least not completely) be disbursed. You have a claim to your remuneration, but it depends on the individual case whether and in what amount this can be compensated.

In principle, even if you know about the insolvency of the company and you realize that the insolvent employer can not pay any salaries, you should nevertheless ask in writing for payment and point out your claims. It is also important to distinguish when your payment entitlements have arisen against the employer.

Receivables before the insolvency proceedings: If the company was unable to pay the salaries before the bankruptcy proceedings were initiated, you must register them with the insolvency administrator. The insolvency administrator usually has a form that you have to fill out. Do this as soon as possible, as there is a deadline for the registration of outstanding claims.
Unfortunately, in this case you can not expect a payment too quickly. Such insolvency claims, which have arisen before the start of the proceedings, will only be settled at the conclusion of the insolvency proceedings - and even then not completely, but only to a certain extent, which will be determined during liquidation.

Claims for the start of insolvency proceedings: The claims arising from the existing employment relationship after the opening of the insolvency proceedings are paid out to the employees by the insolvency administrator. If this is not the case, contact him immediately and ask for payment. It is its responsibility to meet the payment obligations of such claims as far as possible.
However, it may be the case that in the insolvency proceedings there are insufficient funds to cover the resulting claims.

What is the so-called bankruptcy money?
Insolvency money is a service that you can apply for at the Federal Employment Agency. In order to compensate for the payment default by the employer, the bankruptcy money is made available to employees so that they do not slip immediately into financial difficulties.

Within two months after the opening of the insolvency proceedings, you can apply for the bankruptcy money from the Federal Employment Agency, for which you will receive corresponding forms on site, which you can fill out. Inform yourself beforehand by telephone which documents and documents you need and should bring with you.

In the case of a successful application, the insolvency allowance will enable you to receive the remaining compensation up to three months before the bankruptcy.

What happens to other claims against the employer?
In addition to salary claims, employees have further claims against the employer. This applies, for example, to outstanding holidays. During the insolvency, you can apply for a vacation or take a holiday already submitted. If, due to the insolvency, you are still unable to take any outstanding holidays, you are entitled to compensation. All this is regulated by the insolvency administrator, who is the contact person for all questions and points.

Also, the claims from a company pension plan remain, if an employer becomes insolvent. This is the responsibility of the Pension Assurance Association, whose task is to maintain occupational pension provision in the event of insolvency.

In addition to financial claims, workers should not forget that they are entitled to a certificate of employment. This can be an important document for the further career path.

Also read:
Employment certificate : claim, judgments, samples

Does the bankruptcy mean the end of the company?
If an employer is insolvent, this is often equated with the end of the business. Wrongly! The initial objective of insolvency proceedings is always a possible reorganization and the examination of various options and ways of overcoming the insolvency. For example, talks with creditors can be held in order to reduce payment obligations; a strategic reorientation is also conceivable, for example through the separation of individual operating units.

In addition, there is a possibility that the operation is taken over by a buyer and investor. This is referred to as a transfer of business, whereby all existing employment relationships are taken over and continue. If, during the insolvency, a major investor takes over your employer, this does not change the status of your employment relationship.

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