What employees have to expect in the event of a company bankruptcy

Ashkan Saljoughi PR

The world is upside down: Although the economy collapsed due to the corona pandemic in 2020, company insolvencies have fallen to an all-time low in this country, according to a study by the Institute of German Economy (IW). But many of these “zombie companies”, which have been artificially kept alive through Corona aid or cheap loans, are expected to fall soon. It is therefore important for workers to be aware of their rights and the pitfalls of bankruptcy proceedings.

Many companies that were already in financial distress before the corona pandemic keep themselves artificially alive through state aid or at least through the prospect of it. A serious sign that these so-called zombie companies are about to go bankrupt or are already bankrupt is the cessation of continued wages – despite ongoing operations. Then speed is of the essence. If you let yourself be put off and hope that everything will come back to normal and thereby miss the application deadline, you can quickly lose several thousand euros.

There is (partly) money from the Employment Agency

Because the employment agency pays so-called insolvency money in the amount of the wages. Provided that those affected have submitted the relevant application within two months, including after the opening of insolvency proceedings. If you miss this deadline, you will lose up to three months’ salary.

Only those employees who are above the contribution assessment limit in the statutory pension insurance have to expect regular deductions from their salaries – ie earn more than approx. 80,000 euros gross per year.

There is less money if employees are released immediately in the event of bankruptcy. Then they can assert their claim against the employment agency for non-compliance and then receive payments in the amount of unemployment benefit I.

Keep your eyes open to dismissals

Even if it is painful for employees: insolvency administrators can terminate them. And with shorter than the usual or agreed deadlines. However, those affected can at least limit the damage and claim premature damage in the event of early termination. However, these are only insolvency claims that cannot be met in full on a regular basis.

Be careful with severance payments

On the other hand, employees who agree to a termination agreement with a severance payment before the opening of insolvency proceedings are unlucky. You can no longer sue for this amount after the bankruptcy has occurred. So when bankruptcy threatens, workers should think twice about signing a termination agreement.

Continuing with a company buyer opens up opportunities

Often, insolvency administrators terminate the employee and then sell the company in whole or in part. In this case, the employment relationship is often transferred to the buyer. This gives employees the opportunity to take action against the dismissal. Because the strict protection against dismissal also applies in bankruptcy.

Goodbye to overtime

After the opening of insolvency proceedings, overtime previously worked can no longer be sued or celebrated. So if bankruptcy is imminent, employees should celebrate it in good time.

Job reference, who is responsible

The issue of a job reference is also clearly regulated. If the employment relationship ends before insolvency proceedings are opened, this must be signed by the old employer – even if the insolvency proceedings have been opened in the meantime. Otherwise, the insolvency administrator is responsible. However, since experience has shown that these only produce very superficial certificates, those affected should submit their own template.

Ashkan Saljoughi is a legal expert and head of the law firm Chevalier Rechtsanwälte for labor law in Berlin, which represents and enforces the rights of employees throughout Germany. The business model combines the activities of a classic law firm (Chevalier Rechtsanwaltsgesellschaft mbH) with a technology company (Chevalier GmbH, a subsidiary of Flightright GmbH). This cooperation enables the law firm’s lawyers to focus on legal issues as well as on advising and supporting clients and being 100 percent there for them using innovative IT solutions.


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