ARCHIVESHISTORIQUES
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DOCUMENTS "COM"
COM(78)141
Vol.1978/0048

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(78)141 final
Brussels,11April1978.
Proposalfora
COUNCILDIRECTIVE
ontheapproximation ofthelawsoftheMember
Statesconcerning theprotectionofemployees
intheeventoftheinsolvencyoftheiremployer
(submittedtotheCouncilbytheCommission )
C0MC78)141final

EXPLANATORY MEMORANDUM
1.GeneralRemarks
Detailedinvestigations "bytheCommissionintothelawand
praotioeintheMemberStatesasregardsinsolvencyproceedings haveshown
thatemployees'claimsarisingfromtheiroontractsofemploymentare
inadequately protectedunderbankruptcylawintheeventoftheiremployer
"becoming "bankruptorotherwiseinsolvent.Themainreasonsforthisareas
follows:
1.Experiencehasshownthatinmanyoasestheassetsofthe
"bankruptcyarenotsufficienttomeetoutstandingclaimsarisingfromthe
contractofemploymentevenwherethesehaveapreferential ranking.There
iscertainlylittlechanceofcoveringfromthe"bankruptcyassetsolaims
whichhavealreadyarisen "butwillonly"becomedueatafuturedatefe.g.,
thosearisingfromaaoccupational retirementpensionscheme.Theincome
situationofemployeesisthowever,fundamentally differentfromthatof
othereconomically activesectionsofthepopulationinthatasagroup
theyareentirelydependentontheremuneration receivedinreturnfor
theirlabourandcannotasarulehaverecoursetoothersourcesofinoome.
Consequently ,iftheagreedandexpectedconsideration foranemployee's
labourisnotforthcoming,heisdeprivedofthe"basisforhismaterial
existenoe.
2.Bankruptcyproceedingsoftentakeaverylongtime.The
employeeis,however,dependentfortheabovereasonsonregularpayment
forhislabour.Hishavingtowaituntiltheconclusionofbankruptcy
proceedingsforwhatmayultimatelybeonlypartialsatisfaction ofhis
claimsfromtheemploymentrelationship representsatleastatemporary
threattothelivelihoodofhimselfandhisfamily.
SeeDoo.V/305/1/76-final:Comparativesurveyontheprotectionof
employeesintheeventoftheinsolvencyoftheiremployerintheMember
StatesoftheEuropeanCommunity.

-2-
3.Theemployeeisnotusuallyinapositiontograspthe
practioalintricaciesofthebankruptcyproceedings andoannotasarule
beexpeotedtobeartheconsiderable costsoflegalrepresentation atthe
proceedings .Hehasthusverylittleohanoeofrealizingevenwellfounded
claimssatisfactorily againsttheliquidator.
4.Theemployeeisentirelyunprotectedincaseswherethe
employer'sinsolvencydoesnotleadtobankruptcyproceedings )either
becausetherearenobankruptcyassetsfordistribution orforother
reasons.
Theonlywaytoimprovethissituationisbyensuringthat
theoutstandingclaimsofanemployeeagainstaninsolventemployerare
metuptoacertainlevelbyinstitutions whichareindependentofthe
financialpositionoftheemployerandcannotthemselvesbecomeinsolvent.
Suchinstitutions havealreadybeensetupundernationallegislationin
severalMemberStates.
Thesituationwouldappeartocallforharmonization ofthe
relevantprovisionsintheMemberStateswithaviewtoensuringadequate
protectionforemployeesintheeventoftheiremployerbecominginsolvent.
Increasingeconomicinterdependence imposestherequirement
thatemployees *olaimsarisingfromtheemploymentrelationship against
insolventemployersshouldreceiveequalprotectioninallMemberStates.
Majordifferences betweenthesystemsfortheprotectionofemployees'
claimsagainstinsolventemployersandthefactthatthereisnoadequate
protectioninsomeMemberStatesincreasesocialimbalanceswithinthe
Communityandthusdirectlyaffectthefunctioningofthecommonmarket.
Itisthereforenecessarytopromotetheapproximation oflawsinthis
fieldwhilemaintainingtheimprovementdesoribedinArtiole117ofthe
Treaty.

-3-
II.CommentaontheArticles
Artiole1
Article1lay*downthematerialandterritorial scopeofthe
proposedDirective.Itcoversclaimsarisingfromtoothemploymentand
trainingrelationships .Theserelationships aretobedefinedaccordingto
nationallaw.
Inprinciple,theDirectiveappliestoallcasesofinsolvency
occurringwithintheterritorial soopeoftheTreaty.Theaimsofthe
Directivedemandthatwhetheraninsolvencyiscoveredmustnotdependon
thenationalityofeithertheemployeeortheemployerbutsolelyon
whethertheinsolvencyinquestioninvolvesanundertakingorbusiness
withinthisterritorial scope.TheDirectivewillthereforealsoaoquire
legalsignificanceforemployersfromnon-membercountriesiftheyhave
undertakings orbusinesseswithintheCommunityandtheclaimsof
employeestherehavenotbeensatisfiedasaresultoftheinsolvencyof
anemployerestablishedinanon-membercountry.
Article1alsocoversthecaseofemployeessenttoworkin
noiir-membercountriesbyanemployerestablishedwithintheterritorial
soopeoftheTreatyorfromaplaceofbusinesswithinthatscopewithout
interruption intheiroriginalcontractualrelationship .Insuchcases
employeesremaindependentontheeconomicfortunesoftheiroriginal
employerinthesamewayasbeforetheyweresenttoanon-membercountry.
Thismeansthattheyrunexactlythesameriskasworkersemployedwithin
theCommunity.Forthesakeofecpxality,therefore,theymustreoeivethe
sameprotection.

-4-
Artide2
Article2definestheoonoeptofinsolvencyentitling 1an
employeetocl&inagainsttheguaranteeinstitutions .Indefininginsolven­
cyforthepurr>sesofthisDirectivetheaimistotietheoonoeptto
objectivelyverifiablecriteriawhiohare,asfaraspossible,easyto
recogniseandprove.Thisisintended,inparticular,toavoidabusesin
thosecaseswhere,forinstanoe,theemployerisnotunablebutmerely
unwillingtopay.InallMemberStatesthereareprovisionsforpro­
ceedingstodistributetheassetsofaninsolventdebtoramongsthis
oreditors.Eitherth';openingofsuchproceedingsortherejectiondueto
laokofdistributable assetsofanapplicationtoopenproceedings canbe
takenasconstituting theonsetofinsolvency.Thesameappliesifthe
employer'sbusinesshasbeenoloseddownand,giventhecircumstanoes ,this
canbeattributedtohisinsolvency.
Inviewoftheolausepermittingmorefavourableprovisions
(Article8),theabovesituationsconstitutingevidenceoftheinsolvency
oftheemployerrepresentnomorethanabasicminimum.Iftheysowish,
MemberStatesmaythereforeextendthedefinitiontobringothercases
withinthescopeoftheDirective.
Artide3
Article3definestheclaimstobepaidbytheguarantee
institutions .Althoughtheconceptofclaimsarisingfromanemployment
ortrainingrelationshipwillbedeterminedfirstandforemostbynational
law,thegeneraldefinitiongiveninArticle3indicatesth.ittheconcept
ofclaimsarisingfromanemploymentortrainingrelationshipistobe
takeninthewidestpossiblesenseandthatitisimmaterialwhetherthe
immediatelegalbasisfortheseclaimsistheemploymentortraining
oontractitself,anin-companyagreement,acollectiveagreementora
statutoryprovision.

-5-
Thereasonforthedistinctionbetweenclaimscovered "byArticle3(a)and
thosecovered "byArticle3Cb)isthefactthat,inadditiontoregularwage
payments,labourlawalsorecognizesonoe-offpaymentstotheemployee,
whichcanbetMateddifferentlyasregardsthelimitations onliability
permittedtinderArticle4*Itshould,however,bepointedoutinthiscon­
nectionthatthelistmaybeextendedbyMemberStates,byvirtueofthe
clausepermittingmorefavourableprovisions(Article8).Article3also
stipulatesthattheDireotiveonlyappliestoclaimsarisingbeforethe
employer'sinsolvencyandnotyetsatisfiedatthatpointintime.
Theexactnatureoftheinstitutions tosatisfyemployees'
claimsintheeventoftheinsolvencyoftheiremployerisnotspecified.
Article3describesthemsimplyas"institutions",leavingtheorganizat­
ionaldetailstobesettledbytheindividual MemberStates.Itshould,
however,benotedthatArticle5laysdowncertainminimumrequirements
whicharenecessaryfortheattainmentoftheDirective'saimandmust
thereforebeobservedinallcases.
Article4
ThisArticleempowerstheMemberStatestoplacecertain
limitations ontheclaimsagainsttheguaranteeinstitutions providedfor
intheDirective.
Inordertoavoidexcessivedemandsonthefinancialresources
oftheguaranteeinstitutions ,severalMemberStateshaveplacedlimitations
intermsoftimeand/oramountontheclaimswhichtheysureliabletopay.
Thisisareasonableactionandsuchlimitations shouldthereforecontinue
tobepermittedundertheprovisionsofthisDirective.Thelimitations
mustnot,however,besosevereastorendertheintendedprotectionfor
employeesineffectual .Forthisreason,Article4restrictsthelimitations
whichmaybeplacedontheliabilityoftheguaranteeinstitutions .However,
asthevaluationofemployees'regularremuneration andregularpayments
arisingfromatrainingrelationship mayvaryfromcountrytocountry,
Article4(a)makesnomentionofabsoluteamounts.Instead,ittakesan
amountequivalenttotheremuneration orpaymentsforthreemonthsasthe
criterionforareasonablelimitation.Forotheroutstanding claims,the
arrangementproposedinArticle4(b)seemsappropriate.

-6-
Article4onlyempowerstheMemberStatestolimitthe
liabilityoftheguaranteeinstitutions ,itinnosenseobligesthemto
doso.
Article5
ThisArticlelaysdowntheminimumorganizational require­
mentstobeobservedinallcasesbyMemberStatestoensurethatthe
guaranteeinstitutions canfulfiltheaimsoftheDirectiveefficiently.
Fortherest,theMemberStateshavewidediscretionasregardsstructure,
financingandmethodofoperation,thoughthesemust,ofcourse,be
compatiblewiththeoverallintentionsoftheDirectiveasregardsthe
protectionofemployees.
Article6
ThisArticlerequiresMemberStatestoensurethatemployees'
entitlementtosocialsecuritybenefitsisnotadverselyaffectedbynon-
paymentofcontributions resultingfromtheinsolvencyoftheiremployer.
Incertaincases,nationallawprovidesthattheemployeeisentitledto
socialsecuritybenefitsevenifcontributions havenotbeenpaid.In
thissituationtheemployeesuffersnolossasaresultofnon-paymentof
contributions.
•Dieemployeemay,however,sufferlosswherethelawsof
MemberStatesmakesocialsecuritybenefitsdependentoncontributions
actuallypaid.Thelevelofinvalidityorretirementpensions,for
instanoe,isasaruledependentorthecontributions paid.Inorder
toensurethattheemployeesuffersnolossinsuchcases,itwas
necessarytobringthismatterwithinthescopeoftheDirective.The
choiceofwaysandmeansislefttoMemberStates.Theymaychooseto
tackletheproblemwithintheframeworkoftheregulations governing
theirsocialsecurityschemes,orbyprovidingthatcontributions must
bepaidbytheguaranteeinstitutions ,orbyanyotherappropriate method.
/

-7-
Itshould,however,"benotedthatthelimitationspermitted
underArticle4curenotapplicabletoArticle6.Allpotentiallossesfor
theemployeearisingfromnon-paymentofcontributions arethereforeto
becoveredinfull.Whereasitispossibletojustifylimitations on
claimsunderArticle3ongroundsofcostanditisnotentirelyunreason­
abletoexpectemployeestobeartheeffectofsuohlimitations,itwould
beanunjustifiable hardshipfortheemployeeandonecontradicting the
spiritoftheDirectiveifhisemployer'sfailuretopaycontributions ,
forwhichtheemployeecannotbeheldresponsible ,weretoaffecthis
fulfilmentofconditionsforentitlementtoorthelevelof,forinstance,
retirementpension.
Article7
Itwouldbeparticularly harshifanemployeeweretolose
rightsconferringimmediateorprospective entitlementtobenefitsunder
asupplementary companyorinter-company pensionschemebecausethe
employerortheresponsible bodywasnolongerinapositiontopaythe
benefitsearnedbytheemployeethroughmanyyearsworkintheundertaking .
Article7thereforerequiresMemberStatestotakeappropriate measures
tosafeguardemployees'rightsundersuchschemes,whilstleavingMember
Statestodecideonwaysandmeans.InthistheDirectiveisfollowingthe
solutiontothesameproblemalreadyadoptedinArticle3(3)ofthe
CouncilDirectiveof14February1977ontheapproximation ofthelaws
oftheMemberStatesrelatingtothesafeguarding ofemployees'rightsin
theeventoftransfersofundertakings ,businessesorpartsofbusinesses
(OJNoL6lof5March1977).
Article8
Article8makesitclearthatthestandardslaiddowninthe
Direotiverepresentminimumrequirements only.Existinglaws,regulations
andadministrative provisionswhicharemorefavourableforemployeesthan
thesestandardsmaythereforecontinuetobeappliedandthereisnothing
topreventMemberStatesintroducing new,morefavourableprovisionsin
thefuture.
Article9"to11
Article9"to11containthefinalprovisionsrequiredbythe
Treatyestablishing theEuropeanEconomicCommunity.

COUNCIL DIRECTIVE
onthe approximation ofthe laws oftheMember States
concerning theprotection ofemployees inthe event
oftheinsolvency oftheir employer
THECOUNCIL OPTHEEUROPEAN COMMUNITIES ,
Having regard totheTreaty establishing theEuropean Economic Community ,
andinparticular Article 100 thereof t
Having regard totheproposal from theCommission ,
Having regard totheopinion oftheEuropean Parliament ,
Having regard totheopinion oftheEconomic andSocial Committee ,
Whereas employees' claims arising from thecontract ofemployment are
inadequately protected inthe event oftheir employer "becoming "bankrupt or
otherwise insolvent ,particularly since employees ,unlike other contracting
parties ,arenotinaposition toprotect themselves from theconsequences
ofinsolvency oftheother party tothecontract bydemanding theprovision
ofsecurity !
Whereas thedistributable assets areinmany cases notsufficient tomeet
outstanding claims arising under thecontract ofemployment even w
these enjoy statutory rights ofpreference over other claims |

-2-
Whereas insolvency proceedings usually take avery long time andtheir
intrioaoies aredifficult fortheemployee tograsp ,with theoonsequenoe
that thesatisfaction ofhismaterial needs ismade more difficult ;
Whereas this situation calls forthe creation ofspecial institutions to
safeguard theolaims oftheemployees conoernedf
Whereas such institutions have been set tipinmost oftheMember States
butunder widely differing terms ,whilst insome Member States there are
nospecial institutions toensure theprotection ofemployees' olaims in
theevent oftheinsolvenoy oftheir employer }
Whereas increasing economio interdependence across national boundaries
imposes therequirement that employees *claims arising from theemployment
relationship intheevent oftheinsolvency oftheir employer should receive
equal protection inallMember States ,since theexisting differences rein­
force social imbalances within theCommunity andthus have adirect effect
onthefunctioning ofthecommon market ;
Whereas itistherefore neoessary topromote theapproximation ofthe laws ,
regulations andadministrative provisions oftheMember States while main­
taining theimprovement described inArtiole 117oftheTreaty ,
HAS ADOPTED THIS DIRECTIVE :

Artide 1
This Directive shall apply toclaims arising from employment ortraining
relationships against insolvent employers whose undertaking orbusiness
issituated within theterritorial jurisdiction oftheTreaty .
Artide 2
Forthepurposes ofthis Directive ,anemployer shall bedeemed insolvent
if:
(a)proceedings have been opened under thelaws ,regulations and
administrative provisions oftheMembe :States tosatisfy jointly
theclaims ofcreditors ,including creditors with claims under
Article 1ofthis directive ,from theassets oftheemployer ,or
(b)anapplication fortheopening ofsuoh proceedings hasbeen rejected
onthegrounds oflack ofassets ,or
(o)hisbusiness hasbeen closed down duetoinsolvency .
Artide 3
Member States shall setupinstitutions tosatisfy theunfulfilled claims
ofemployees arising before theonset oftheemployer 'sinsolvency :
(a)toremunerations ortopayments arising from atraining relationship ,
(b)toother cash orequivalent benefits onthepart oftheemployer in
connection with sickness ,holidays ortermination ofemployment and
togratuities ,bonuses orindemnities .

Article4
MemberStatesmaylimittheliabilityoftheguaranteeinstitutions ,but
innocasetolessthan*
(a)thatproportionoftheunsatisfiedclaimsunderArticle3(a)corres­
pondingtotheremuneration orpaymentsforthreemonths)
(b)thoseunsatisfiedolaimsunderArticle3(b)whichhavearisenduring
thetwelvemonthsprecedingtheonsetofinsolvencyorhavewithin
thatperiodformedthesubjectofexecutionwhiohhasnot
satisfied.
Article5
MemberStatesshallobservethefollowingprinciplesindeterminingthe
guaranteeinstitutions' structure,financingandmethodofoperation:
(a)theassetsoftheguaranteeinstitutions mustbeindependentofthe
employer'sbusinessassetsandinaccesibletoinsolvencyproceedings ;
(b)theinstitutions mustnotbefinancedsolelybycontributions from
employees)
(c)paymentshallbemadeontheapplicationoftheemployeeentitledto
claim.Averbalapplicationshallbesufficient.Applications shall
beadmissiblefromtheonsetofinsolvencyandmustbemadewithin
aperiodofsixmonthsthereafter )
(d)theguaranteeinstitution'sliabilitytowardsanemployeeentitled
toclaimshallnotdependonwhethertheemployerconcernedhas
fulfilledhisobligations towardstheinstitution )
(e)MemberStatesmayonlymakepaymentbytheinstitutions dependenton
claimsbeingeitherundisputedorsubstantiated .

Artide6
MemberStatesshalladoptthemeasuresnecessarytoensurethatany
failuretosatisfytheolaimsofsocialsecurityinstitutions arising
beforetheonsetofinsolvencytocompulsorycontributions tothe
statutorysocialsecurityschemesinMemberStatesdoesnotadversely
affectemployees'benefitentitlement.
Artide7
MemberStatesshalladoptthemeasuresnecessarytoprotecttheinterests
ofemployeesandofpersonsnolongeremployedintheinsolvent
employer'sbusinessattheonsetofinsolvencywithinthemeaningof
Article2inrespectofrightsarisingbeforetheonsetofinsolvency
conferringonthemimmediateorprospectiveentitlementtoold-age
benefits)includingsurvivors'benefits,undersupplementary company
orinter-company pensionschemesoutsidethestatutorysocialsecurity
schemesinMemberStates.
Article8
ThisDirectiveshallnotaffecttherightofMemberStatestoapplyor
introducelaws,regulationsoradministrative provisionswhicharemore
favourabletoemployees.
Artide9
1.MemberStatesshallbringintoforcethelaws,regulations and
administrative provisionsneededtocomplywiththisDirective
withineighteenmonthsofitsnotification andshallforthwith
informtheCommissionthereof.
2.MemberStatesshallcommunicatetotheCommissionthetextsofthe
laws,regulationsandadministrative provisionswhichtheyadoptin
thefieldcoveredbythisDirective.

Article10
Withineighteenmonthsfollowingtheexpiryoftheeighteenmonthperiod
laiddowninArticle9»MemberStatesshallforwardallrelevant
informationtotheCommissioninordertoenableittodrawupa
reportontheapplicationofthisDirectiveforsubmissiontothe
Council•
Artide11
Th-'t,DirectiveisaddressedtotheMemberStates.