Company bankruptcy

Employees, who become subject to the company they work for going bankrupt, normally have a claim for compensation from the company due to a rescission of their employment contract. Generally, there is compensation for the term of notice of the employee.

However, the Wage Guarantee Fund reserves the right to deny payments to wage earners, due to compensation for the term of notice, from the insolvency estate unless the fund administration’s detailed instructions are followed.

In the event a company goes bankrupt, a VR member can turn to the union’s office which makes the claim for him to the company’s insolvent estate. If the estate’s liquidator approves of the claim and the company that has been taken into liquidation cannot afford the wage payments, the union can on his behalf request a payment from the Wage Guarantee Fund. Wage demands that are older than 18 months from the bankruptcy (deadline) do not have priority towards the insolvency estate and therefore not towards the Wage Guarantee Fund either. 

Wage Guarantee Fund

The Wage Guarantee Fund has specific rules of procedure which are good to keep in mind. The main rules are as follows:

  • Only those wage earners who are registered as unemployed at the employment agency of the respective municipality have a right to benefits from the Wage Guarantee Fund due to a rescission or termination of an employment contract upon the employer’s estate being received for bankruptcy proceedings.
  • One must apply for a job or register as unemployed within two weeks from the time of a rescission of an employment contract, otherwise benefits for the respective wage earner will diminish during the term of notice. A one-sided statement by the employer that the wage earner has applied for a job during the term of notice is not considered acceptable. Benefits will only be paid for the period during which the applicant has verifiably been registered as a job applicant.

With these rules, the Wage Guarantee Fund is requesting a certain procedure for each wage earner who applies for benefits from the fund. If these requirements of the fund’s board of directors are not followed to the letter, the fund reserves full rights to deny payments.