Paris Bakery employees and supporters. Pic: Paul Reynolds.
Following the success of the Vita Cortex workers’ occupation, employees of businesses in financial trouble may look to sit-ins as a way of securing their entitlements.
Here’s a handy guide drawn up by Hayes Solicitors. Worth noting that Employees are ‘Preferred Creditors’ in Ireland but ranked behind ‘Revenue, Liquidator and holders of fixed charges [usually banks]’. In the UK the Crown (the equivalent of Revenue) was removed as a Preferred Creditor in 2002 legislation, furthering Employees’ Rights.
Have a read of the guide after the jump.
Q: My employer is insolvent – what steps can I take?
If you are an employee and your employer is insolvent (i.e. has been adjudicated bankrupt, is in receivership/examinership, or is in liquidation), what then are your rights?
In the normal course of events, an employee is entitled to all arrears in wages and a host of other payments which are protected under employment legislation. These rights are curtailed somewhat on insolvency however.
If your employer is in examinership, then technically there is no impact on your employment status. Similarly there is no effect on the employment relationship where a receiver is appointed in the usual manner (i.e. under a debenture). However once a liquidator is appointed, depending on the circumstances an employee may be deemed to be immediately dismissed and therefore entitled to arrears of salary and damages for wrongful dismissal.
In an insolvency situation (i.e. where a liquidator has been appointed) you are most likely going to be made redundant. In any redundancy situation you will potentially be entitled to the following payments:
• Payment in lieu of notice (either statutory or contractual);
• Outstanding holiday entitlements;
• Statutory redundancy payment;
• Ex gratia redundancy payment.
In the event that your employer is unable to meet these payments by virtue of its insolvency, you will rank as a preferential creditor (i.e. you will rank only behind the Revenue Commissioners, the liquidator and holders of fixed charges in any distribution of your employer’s assets by a liquidator). In practical terms this means that you will be entitled to the full amount (or an amount on a pro rata basis if there is a shortfall) of the following entitlements:
• All wages/salary due for the 4 month period prior to winding up (capped at a maximum figure of €3,174.35;
• Accrued holiday entitlements, certain payments under occupational health and superannuation schemes;
• Payment in lieu of notice (either statutory or contractual);
• Compensation awarded by the Employment Appeals Tribunal in respect of an Unfair Dismissal’s claim;
• Statutory redundancy payments.
These payments will only be made upon conclusion of the winding up process which can take a substantial period of time.
Q: What if the ‘pot’ is empty?
If there are insufficient funds available to the liquidator to distribute to employees and make the payments specified above, then there is a final ‘safety net’ available to employees in the form of the Social Insurance Fund. The Fund comprises two separate schemes – the Insolvency Payments Scheme and the Redundancy Payments Scheme. Your employer must be deemed ‘insolvent’ under these Schemes in order for the following payments to be considered by the Department of Social Protection:
1. Payments under Insolvency Payments Scheme:
• Arrears of wages/salary, holiday pay, sick pay, pay in lieu of notice. This is subject to a cap of €600 per week, up to a maximum of 8 weeks arrears.
• Awards made under employment legislation (e.g. awards made by the Employment Appeals Tribunal in an Unfair Dismissal’s action);
• Certain contributions to occupational health schemes and PRSA’s.
For any outstanding entitlements, employees rank as either preferential or unsecured creditors depending on the nature of the claim. Importantly, the Scheme will only consider entitlements that have arisen in the 18 months prior to the date of insolvency/dismissal award
2. Payments under Redundancy Payments Scheme:
Applications to this Scheme may be made where an employer is ‘insolvent’, as defined under the Redundancy Payments Acts 1967 – 2008, and is unable to pay the statutory redundancy entitlements of its employees.
Q: What if my employer has not wound the business up, but has ceased to trade?
If your employer has ceased to trade but has not gone into ‘formal’ liquidation, you cannot avail of the Social Insurance Fund as outlined above. This is a major weakness in the Fund. The only remedies available to an employee in this situation lie with an application before a Rights Commissioner, the Employment Appeals Tribunal or to the Labour Court. It should also be noted that under s 251 of the Companies Act 1990 the Director of Corporate Enforcement has the power to apply for various orders against the company if it is insolvent and has not been wound up. Any member of the public can make a complaint to the Insolvency Section of the ODCE at http://www.odce.ie/en-gb/formsprocedures/complaintsform.aspx
Taken from Hayes solicitors.