EurWORK European Observatory of Working Life

Insolvency

Insolvency refers to the economic failure of an enterprise because it lacks sufficient financial resources to satisfy claims against it. In 1980, an EU directive was introduced (80/987/EEC) to provide a minimum degree of protection for employees in the event of the insolvency of their employer. The directive applies to employees’ claims under their contracts of employment against insolvent employers. Member States are required to ensure that institutions can guarantee payment of these claims, though some limitations may be introduced. A Commission Communication of 2002 (COM (2002) 265 Final) re-examined the situation in the light of European Court of Justice cases and a number of emerging problems, such as transnational insolvency situations, where it was not clear which guarantee institution was responsible for paying claims. Following consultation of the social partners pursuant to Article 138(2) EC (now Article 154 TFEU), the insolvency directive was updated and a revised text was finalised on 23 September 2002 (Directive 2002/74/EC of the European Parliament and of the Council of 23 September 2002 amending Directive 80/987/EEC, on the approximation of the laws of the Member States relating to the protection of employees in the event of the insolvency of their employer). Among other changes, the revised directive requires a clarification of which institution is responsible for meeting pay claims in these circumstances, and adapts the definition of insolvency to include proceedings other than liquidation.

See also: Acquired Rights Directive; collective redundancy; Francovich principle.


Please note: the European industrial relations dictionary is updated annually. If errors are brought to our attention, we will try to correct them.
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