R [EU]edundancy & Insolvency

Transfer in Insolvency

Similar provisions apply to a transfer during insolvency proceedings which have been opened in relation to a transferor whether or not they have been instituted with a view to the liquidation of the assets of the transferor. A member state may provide that the transferor’s debt payable before the opening of the insolvency are not transferred to the transferee, provided such proceedings give rise to protections for the employee that is at least equivalent to that in council directive regarding the protection of employment rights on insolvency.

The transferor and transferee on the one hand, and the representatives of the employee, on the other hand, may agree to alterations to the employee’s terms and conditions in order to safeguard employment opportunities by ensuring the survival of the economic entity.

Member states may take measures to prevent misuse of insolvency proceedings in a way as to deprive employees of their rights in the event of a transfer.

Where the transferor is subject to bankruptcy or insolvency proceedings, states may make the necessary steps to ensure that transferred employees are properly represented until the new representatives of the employee are elected or appointed. If the entity does not preserve its autonomy, the states must take the necessary measures to ensure the transferred employees continue to be properly represented during the period necessary for the new appointment.

If the representative’s term of office expires as a result of the transfer, they must continue to enjoy the protection provided.

The transferor and transferee must inform the representatives of their employees in good time of the proposed date of the transfer, reasons for transfer, legal, economic, and social implications and any measures envisaged in relation to the employees.

The transferor must forward such information before the transfer is carried out and the transferee must do so before the employees are directly affected by the transfer as regards to the conditions of employment.

Where transferor and transferee envisage measures in relation to employees, they must consult with the representatives in good time on such measures with a view to reaching an agreement.

The requirements apply irrespective of whether the transfer is decided by the employer or by an undertaking controlling the employer. It is not permissible to argue that the failure to provide the information is due to the failure by the seller to provide the requisite information.

States may introduce provisions which are more favorable to employees or promote or permit collective agreements between social partners which are more favorable.

States must introduce measures as necessary to enable all employees and representatives of employees to pursue their claims by legal process. The rules apply to part-time workers, temporary employees, and employment relationships governed by fixed-term contracts.

Securing Employees’ Rights on Insolvency

An EU directive provides for protection of employees in the event of employer’s insolvency. Rules must also apply to part-time, fixed-term employees on temporary contracts.

States must provide institutions to guarantee payment of outstanding employee claims related to pay for a period fixed by the member states. They may limit liability under conditions.

The minimum guarantee must be 3 months pay in a reference period of 6 months or 8 weeks in a reference period of 18 months. The states may apply rules to the organization financing the operation of the guarantee institution in accordance with certain principles provided in the directive.

The states may stipulate that the payment guarantee does not apply to contributions due under social security and supplementary schemes. They may take steps to ensure that non-payment of compulsory contributions due from the employer before the onset of his insolvency does not adversely affect the employees’ benefits in respect of those insurance institutions insofar as the employee\’s contributions are deducted at source and the remuneration paid.

The interests of employees and persons who have already left the undertaking at the start of insolvency must be protected as regards to rights conferring on them immediate or prospective entitlement to old age benefits, survivor benefits, supplementary company or intra-company pension schemes outside national statutory schemes.

If an undertaking operating in at least two states is in insolvency, the employer\’s outstanding claim must be met by the institution in the state where the employee works. States must exchange information on their guarantee schemes, forward such information to the Commission, and make it accessible to the public.

States may introduce more favorable measures for employees. Measures may be taken to avoid abuse or refuse the liability of the guarantee obligations if it appears that the fulfillment is unjustifiable because of the existence of special links between the employer and employee.

Collective Redundancies

EU directives provide for consultation on the occasion of collective redundancies.  Employers contemplating collective redundancies must hold consultations with representatives with a view to reaching an agreement.  They must at least cover ways and means of avoiding collective redundancies or reducing the number of workers affected and mitigating the consequence by resort to accompanying social measures and redeploying or retraining employees made redundant.

States may make provision for employee representatives to call on the services of experts in accordance with measures under national law.  Employee representatives must be furnished with all relevant information during the course of consultation to notify them of

• Reasons
• The period during which redundancies are to be effected
• Number and category of workers normally employed
• Numbers to be made redundant
• Criteria used for selection
• Method of calculation of compensation

The directive lays down the procedures to be followed.  The employer notifies the competent public authority in writing of the projected – collective redundancies.  The notifications must contain all relevant information concerning redundancies, consultations, and methods used to calculate compensation.  Where the cessation of activity as a result of a judicial decision, e.g. solvency, notification, it is only necessary at the request of the authority.  The employer forwards a copy of the notification to employee representatives who may send comments to the authority.

Collective redundancies take effect at the earliest of 30 days after the notification of the competent authority.  The authority may use this period to seek solutions.  States may grant the authority the power to reduce this period or extend it to 60 days following notification in cases where the problems cannot be resolved.  This is not compulsory for collective redundancies following a cessation of activity resulting from a judicial decision.  Extensions may be granted.