I as in Insolvency

What effect does my employer’s insolvency has on my employment relationship?

If an employer cannot meet his or her payment obligations, he or she is insolvent. Insolvency proceedings are initiated upon application, and an administrator is then appointed to oversee the insolvency proceedings.

In principle, these proceedings do not change the legal situation of employees. Only under a few circumstances special regulations do apply.

Can I be dismissed during insolvency proceedings?

Insolvency proceedings in particular do not constitute grounds for termination.  However, it can be grounds for compulsory redundancies, for example if the business is being shut down or rationalization measures have been decided. The only special feature in case of an insolvency is a different notice period, which only is a maximum of three months.

Employees have the same rights as all other debtors of the employer with regard to claims from the period before the opening of insolvency proceedings, i.e. thus claims must be filed. For the last three months of the employment relationship prior to the initiation, overdue remuneration are covered in full by insolvency benefits. Therefore, as soon as the employer falls behind with the payment of remuneration for more than three months, caution is advised. Benefits (“Insolvenzgeld”) can be applied for from the Federal Employment Agency within two months.

What can the works council do during the restructuration process?

During restructuration, there are often operational changes or shutdowns.  If there is a works council, the employer is required to negotiate the consequences of the operational change for the employees together with the council by means of a reconciliation of interests and an agreement on a social plan.


Please note: This is a very general overview on german labor law. If you need help in your particular case, please do not hestitate to contact me or book your appointment. I’m happy to help.

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