Union claims bankruptcy code reform will reduce worker protection

The Greek government has drafted a bill to reform the bankruptcy code with a view to enhancing Greek companies’ competitiveness. The bill, however, includes regulations that will lower the current level of worker protection. The Greek General Confederation of Labour has asked for the elimination of the adverse regulations and the promotion of protection measures that will facilitate the timely satisfaction of all types of workers’ claims.

Current legal framework

Greek law stipulates that if an employer goes bankrupt employees should be protected in a number of ways. If enforcement action is taken against the employer, employees’ claims shall be satisfied in full from the bankruptcy estate, after which the claims of other creditors will be met. Employees’ are entitled to make claims as follows:

• claims based on the provision of labour in a position of subordination, provided that they have arisen within the two years prior to the bankruptcy declaration, such as claims for pay, allowances, holiday bonuses or compensation for overtime exceeding normal working hours;

• claims for compensation due to termination of the employment relationship.

The case law, which takes into account that the above regulation serves a social purpose ‘consisting in the effective, just protection of those who through their personal labour help companies grow’ (A.P.1485/2003), supports workers’ claims for interest.

As this regulation does not always result in a satisfactory conclusion of employees’ claims due to the fact that a bankrupt employer’s assets are not sufficient, a 1989 law set up an independent account with the Labour Force Employment Organisation (OAED) to immediately satisfy workers’ unpaid claims in the event of employer insolvency.

Contents of draft bill

The draft bill on the reform of the bankruptcy code limits to a large extent the regulation giving preference to workers’ claims, as described above. More specifically, the bill:

• limits the time period for which claims from the provision of work in a position of subordination are preferentially satisfied to six months before the employer’s bankruptcy declaration;

• rules out the payment of interest on such claims. Thus, the case law of the Supreme Court is overturned. On the contrary, it states that interest from the last two years shall be preferentially paid on claims that are secured by collateral.

Finally, the draft bill stipulates that if claims from the provision of work in a position of subordination accumulate along with other claims such as those secured by collateral, and the assets of the bankruptcy estate are insufficient, workers’ claims are not compensated in full first, followed by the other claims. In this case, two categories of creditors are created and half of the amount to be distributed is spread out among each category of creditor.

Trade union reaction

In letters addressed to the Minister of Justice, Anastasios Papaligouras, and the Minister of Development, Dimitris Sioufas, the Greek General Confederation of Labour (GSEE) argued that ‘with the abovementioned regulations of the draft bill, all preference given to workers’ claims is nullified and the possibility of satisfying workers’ claims out of the bankruptcy estate is made even less likely. In this way, the function of wages as a means of livelihood is not recognised, since the bankruptcy proceedings fail to ensure either the rapid or the full satisfaction of workers’ claims.’ Moreover, GSEE believes that: ‘It is certain that regulations like those of the draft bill … make even more difficult the position of the workers, who have already suffered the burden of dismissal and its consequences caused by the bankruptcy, and must now also bear the cost of their employer’s insolvency.’ In this context, GSEE requested the dismissal of the new regulations and the introduction of new protection measures which will facilitate the timely and full satisfaction of workers’ claims.

Sofia Lampousaki, Labour Institute of Greek General Confederation of Labour (INE-GSEE)