EMCC European Monitoring Centre on Change

Wage guarantee in case of insolvency

Greece
Phase: Management
Típus:
  • Response to COVID-19
  • Income support for workers
Utoljára módosítva: 29 June, 2021
Név:

Παροχή λόγω αφερεγγυότητας του εργοδότη

Angol név:

Wage guarantee in case of insolvency

Coverage/Eligibility

The inclusion of employees in the list of creditors in cases of the bankruptcy of an enterprise was changed with Circular no. 1027/2018  with absolute priority being given to the payment of compensation to unpaid workers for a six-month period, calculated as 2.75 multiplied by the minimum wage of €586.08, for example €1,611.72 per month. Essentially, this sum of €1,611.72 multiplied by six months (corresponding to €9,670.32) will be the maximum limit for the absolute priority of unpaid employees over all the other creditors of an enterprise.

The recipients of benefits due to employer insolvency are employees:  

  • of a business declared bankrupt by a judicial decision ruling that the undertaking has definitively closed down and that there is no need to initiate bankruptcy proceedings due to insufficient assets;
  • of a business which has entered liquidation;or
  • of an (insurance) business whose operating licence has been revoked due to violation of the provisions of private insurance legislation.

If the company is put into provisional administration (creditor administration and management) or into receivership, so that a compromise can be reached with its creditors, the case is excluded from protection.

The guarantee covers all claims of the employee for up to three months, but the claims have to have been presented within the last six months before filing for insolvency.

Main characteristics

The employee receives, as wage guarantee, an amount which equals up to three monthly wages or less in the case that the employer owes less than three monthly wages. The application has to be registered with OAED (the public employment service) within six months since the insolvency became public.

The fund is partly funded by employers' contributions (0.15%) and partly by the labour ministry.

The employees’ claims are independent from whether or not the employer paid the contributions.

On average, claims for remuneration are met within 1 month after the application by the employee has been made.

Deadlines

The right of an employee to receive salary in arrears from the account to protect employees in the event of an employer's insolvency is exercised by the employee's written application to the competent service of the OAED (public employment service), no later than six months after:

  • the publication of the decision declaring the employer's bankruptcy;
  • the date that the undertaking entered into liquidation; or
  • the date that the operating licence of the (insurance) undertaking was revoked due to violation of the provisions of private insurance legislation.

Entitlement to these benefits lapses after six months.

All employees are protected through an OAED account set up to cover cases of employer insolvency. The purpose of the 'account to protect employees in the event of an employer's insolvency' is to pay salary arrears of up to three months to employees in a dependent employment relationship who have not been paid because of the insolvency of their employer. The OAED takes the place of the employer in respect of the rights of employees and pays the relevant social security contributions in respect of their salaries. Any outstanding salaries paid to beneficiaries must fall within the six-months period prior to the date of the employer's application for the business to be declared bankrupt or the date of publication of the ministerial decision withdrawing the operating licence (for liquidation of a business). Thereof, the maximum amount that the beneficiaries can claim is up to three months' salary, including credits such as holiday payments, among others. Severance pay is not reimbursed.

The guarantee covers claims from dependent employment, irrespective of the duration of employment and whether or not the employment is still upright, even covering illegal employment relationships if they have the structure of a relationship of dependent labour. There is no minimum duration for the employment relationship.

There are four types of insolvency:

  • the company is announced insolvent by court and its business activities stopped;
  • the company is put under administration;
  • an insurance company that loses its authorisation due to violating legal regulations and therefore becomes insolvent;
  • an employer terminates all employment contracts and goes into insolvency in order to pay its debts.

Funding

  • National funds
  • Companies

Involved actors

National government
legal framework; funding
Public employment services
The application has to be registered with OAED.

Effectiveness

According to the OAED's most recent Activity Report (March 2015 - June 2019) :

Beteween 2015 - 2019, there were 6,143 beneficiaries with a total amount of €23,015,618.78.

Strengths

Given that the rate of enterprises closing down is high, and that the unemployment benefit is low (approx. €360 per month) and provided for a limited time only (approximately one year), the wage guarantee in case of insolvency is an important benefit for people who lose their jobs.

Weaknesses

The Greek civil code does not explicitly define the concept of force majeure. Its provisions specify the principle of tort, according to which the liability of the obligor is limited to actions that can be attributed to his fault (negligence or willful misconduct). In addition to slight negligence, which constitutes the highest degree of fault that entails liability of the obligor, there are cases where the damage of the lender cannot be attributed to tortuous conduct of the obligor. Therefore, an accidental or random (according to the older expression) event is one that cannot be attributed to negligence or willful misconduct of the obligor and could not have been predicted by any reasonable person, e.g. natural disasters (earthquakes, floods, hurricanes) or third party actions (e.g. a third party destroys the benefit due). The term force majeure falls under the category of random (in the general sense) events, which includes the extreme cases of events that cannot be prevented by human actions. Given the foregoing, the worldwide spread of a dangerous contagious virus (COVID-19), is extremely likely to be considered a force majeure event that justifies the non-fulfillment or the suspension of contractual obligations for its duration, however interpreted in practice on a case-by-case basis depending on the actual facts and the specific circumstances. 

The wage guarantee in case of insolvency is a relief for people entering unemployment, however, it is provided for a limited time. Given that social protection in Greece is, in general, limited, it cannot guarantee a living standard above the poverty line for people who lose their jobs.

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