CELEX: 51978PC0141
Language: en
Date: 1978-04-11
Title: Proposal for a COUNCIL DIRECTIVE on the approximation of the laws of the Member States concerning the protection of employees in the event of the insolvency of their employer (submitted to the Council by the Commission)

ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (78) 141
Vol. 1978/0048
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In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983
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In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom 1.
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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
                                          COM(78)141 final
                                          Brussels , 11 April 1978 .
                              Proposal for a
                             COUNCIL DIRECTIVE
             on the approximation of the laws of the Member
             States concerning the protection of employees
             in the event of the insolvency of their employer
             ( submitted to the Council by the Commission )
 C0MC78 ) 141 final
 ---pagebreak---                                EXPLANATORY MEMORANDUM
 1 . General Remarks
                Detailed investigations "by the Commission into the law and
 praotioe in the Member States as regards insolvency proceedings     have shown
that employees' claims arising from their oontracts of employment are
 inadequately protected under bankruptcy law in the event of their employer
"becoming "bankrupt or otherwise insolvent . The main reasons for this are as
 follows :
                1 . Experience has shown that in many oases the assets of the
"bankruptcy are not sufficient to meet outstanding claims arising from the
 contract of employment even where these have a preferential ranking . There
 is certainly little chance of covering from the "bankruptcy assets olaims
which have already arisen "but will only "become due at a future date f e.g. ,
those arising from aa occupational retirement pension scheme . The income
 situation of employees is t however, fundamentally different from that of
 other economically active sections of the population in that as a group
they are entirely dependent on the remuneration received in return for
their labour and cannot as a rule have recourse to other sources of inoome .
 Consequently, if the agreed and expected consideration for an employee 's
 labour is not forthcoming, he is deprived of the "basis for his material
 exist enoe .
                2 . Bankruptcy proceedings often take a very long time . The
 employee is , however, dependent for the above reasons on regular payment
 for his labour . His having to wait until the conclusion of bankruptcy
proceedings for what may ultimately be only partial satisfaction of his
 claims from the employment relationship represents at least a temporary
threat to the livelihood of himself and his family .
  See Doo . V/305/1/76 -final : Comparative survey on the protection of
  employees in the event of the insolvency of their employer in the Member
  States of the European Community .
 ---pagebreak---                                      - 2 -
               3 . The employee is not usually in a position to grasp the
practioal intricacies of the bankruptcy proceedings and oannot as a rule
be expeoted to bear the considerable costs of legal representation at the
proceedings . He has thus very little ohanoe of realizing even well founded
claims satisfactorily against the liquidator .
               4 . The employee is entirely unprotected in cases where the
employer 's insolvency does not lead to bankruptcy proceedings ) either
because there are no bankruptcy assets for distribution or for other
reasons .
               The only way to improve this situation is by ensuring that
the outstanding claims of an employee against an insolvent employer are
met up to a certain level by institutions which are independent of the
financial position of the employer and cannot themselves become insolvent .
Such institutions have already been set up under national legislation in
several Member States .
               The situation would appear to call for harmonization of the
relevant provisions in the Member States with a view to ensuring adequate
protection for employees in the event of their employer becoming insolvent .
               Increasing economic interdependence imposes the requirement
that employees * olaims arising from the employment relationship against
insolvent employers should receive equal protection in all Member States .
Major differences between the systems for the protection of employees'
claims against insolvent employers and the fact that there is no adequate
protection in some Member States increase social imbalances within the
Community and thus directly affect the functioning of the common market .
It is therefore necessary to promote the approximation of laws in this
field while maintaining the improvement desoribed in Artiole 117 of the
Treaty .
 ---pagebreak---                                       - 3 -
II . Commenta on the Articles
Artiole 1
                Article 1 lay* down the material and territorial scope of the
proposed Directive . It covers claims arising from tooth employment and
training relationships . These relationships are to be defined according to
national law .
                In principle , the Directive applies to all cases of insolvency
occurring within the territorial soope of the Treaty . The aims of the
Directive demand that whether an insolvency is covered must not depend on
the nationality of either the employee or the employer but solely on
whether the insolvency in question involves an undertaking or business
within this territorial scope . The Directive will therefore also aoquire
legal significance for employers from non-member countries if they have
undertakings or businesses within the Community and the claims of
employees there have not been satisfied as a result of the insolvency of
an employer established in a non-member country .
                Article 1 also covers the case of employees sent to work in
noiir-member countries by an employer established within the territorial
soope of the Treaty or from a place of business within that scope without
interruption in their original contractual relationship . In such cases
employees remain dependent on the economic fortunes of their original
employer in the same way as before they were sent to a non-member country .
This means that they run exactly the same risk as workers employed within
the Community . For the sake of ecpxality, therefore , they must reoeive the
same protection .
 ---pagebreak---                                       - 4 -
Artide 2
               Article 2 defines the oonoept of insolvency entitling1 an
employee to cl&in against the guarantee institutions . In defining insolven­
cy for the purr > ses of this Directive the aim is to tie the oonoept to
objectively verifiable criteria whioh are , as far as possible , easy to
recognise and prove . This is intended, in particular, to avoid abuses in
those cases where , for instanoe , the employer is not unable but merely
unwilling to pay . In all Member States there are provisions for pro­
ceedings to distribute the assets of an insolvent debtor amongst his
oreditors . Either th'; opening of such proceedings or the rejection due to
laok of distributable assets of an application to open proceedings can be
taken as constituting the onset of insolvency . The same applies if the
employer 's business has been olosed down and, given the circumstanoes , this
can be attributed to his insolvency .
               In view of the olause permitting more favourable provisions
(Article 8 ), the above situations constituting evidence of the insolvency
of the employer represent no more than a basic minimum . If they so wish,
Member States may therefore extend the definition to bring other cases
within the scope of the Directive .
Artide 3
               Article 3 defines the claims to be paid by the guarantee
institutions . Although the concept of claims arising from an employment
or training relationship will be determined first and foremost by national
law , the general definition given in Article 3 indicates th.it the concept
of claims arising from an employment or training relationship is to be
taken in the widest possible sense and that it is immaterial whether the
immediate legal basis for these claims is the employment or training
oontract itself, an in-company agreement , a collective agreement or a
statutory provision .
 ---pagebreak---                                     - 5 -
The reason for the distinction between claims covered "by Article 3(a ) and
those covered "by Article 3Cb ) is the fact that , in addition to regular wage
payments , labour law also recognizes onoe-off payments to the employee ,
which can be t Mated differently as regards the limitations on liability
permitted tinder Article 4 * It should, however, be pointed out in this con­
nection that the list may be extended by Member States , by virtue of the
clause permitting more favourable provisions ( Article 8 ). Article 3 also
stipulates that the Direotive only applies to claims arising before the
employer 's insolvency and not yet satisfied at that point in time .
               The exact nature of the institutions to satisfy employees'
claims in the event of the insolvency of their employer is not specified .
Article 3 describes them simply as "institutions ", leaving the organizat­
ional details to be settled by the individual Member States . It should,
however, be noted that Article 5 lays down certain minimum requirements
which are necessary for the attainment of the Directive 's aim and must
therefore be observed in all cases .
Article 4
               This Article empowers the Member States to place certain
limitations on the claims against the guarantee institutions provided for
in the Directive .
               In order to avoid excessive demands on the financial resources
of the guarantee institutions , several Member States have placed limitations
in terms of time and/or amount on the claims which they sure liable to pay .
This is a reasonable action and such limitations should therefore continue
to be permitted under the provisions of this Directive . The limitations
must not , however, be so severe as to render the intended protection for
employees ineffectual . For this reason, Article 4 restricts the limitations
which may be placed on the liability of the guarantee institutions . However,
as the valuation of employees' regular remuneration and regular payments
arising from a training relationship may vary from country to country,
Article 4(a ) makes no mention of absolute amounts . Instead, it takes an
amount equivalent to the remuneration or payments for three months as the
criterion for a reasonable limitation . For other outstanding claims , the
arrangement proposed in Article 4(b ) seems appropriate .
 ---pagebreak---                                       - 6 -
                  Article 4 only empowers the Member States to limit the
 liability of the guarantee institutions , it in no sense obliges them to
do so .
Article 5
                  This Article lays down the minimum organizational require­
ments to be observed in all cases by Member States to ensure that the
guarantee institutions can fulfil the aims of the Directive efficiently .
For the rest , the Member States have wide discretion as regards structure,
financing and method of operation, though these must , of course, be
compatible with the overall intentions of the Directive as regards the
protection of employees .
Article 6
                  This Article requires Member States to ensure that employees'
entitlement to social security benefits is not adversely affected by non-
payment of contributions resulting from the insolvency of their employer .
In certain cases , national law provides that the employee is entitled to
social security benefits even if contributions have not been paid . In
this situation the employee suffers no loss as a result of non-payment of
cont ribut ions .
                  •Die employee may, however, suffer loss where the laws of
Member States make social security benefits dependent on contributions
actually paid . The level of invalidity or retirement pensions , for
instanoe , is as a rule dependent or the contributions paid . In order
to ensure that the employee suffers no loss in such cases , it was
necessary to bring this matter within the scope of the Directive . The
choice of ways and means is left to Member States . They may choose to
tackle the problem within the framework of the regulations governing
their social security schemes , or by providing that contributions must
be paid by the guarantee institutions , or by any other appropriate method .
                                                                            /
 ---pagebreak---                                   - 7 -
               It should, however, "be noted that the limitations permitted
under Article 4 cure not applicable to Article 6 . All potential losses for
the employee arising from non-payment of contributions are therefore to
be covered in full . Whereas it is possible to justify limitations on
claims under Article 3 on grounds of cost and it is not entirely unreason­
able to expect employees to bear the effect of suoh limitations, it would
be an unjustifiable hardship for the employee and one contradicting the
spirit of the Directive if his employer 's failure to pay contributions ,
for which the employee cannot be held responsible , were to affect his
fulfilment of conditions for entitlement to or the level of, for instance ,
retirement pension .
Article 7
               It would be particularly harsh if an employee were to lose
rights conferring immediate or prospective entitlement to benefits under
a supplementary company or inter-company pension scheme because the
employer or the responsible body was no longer in a position to pay the
benefits earned by the employee through many years work in the undertaking .
Article 7 therefore requires Member States to take appropriate measures
to safeguard employees' rights under such schemes , whilst leaving Member
States to decide on ways and means . In this the Directive is following the
solution to the same problem already adopted in Article 3(3 ) of the
Council Directive of 14 February 1977 on the approximation of the laws
of the Member States relating to the safeguarding of employees' rights in
the event of transfers of undertakings , businesses or parts of businesses
( OJ No L6l of 5 March 1977 ).
Article 8
               Article 8 makes it clear that the standards laid down in the
Direotive represent minimum requirements only . Existing laws , regulations
and administrative provisions which are more favourable for employees than
these standards may therefore continue to be applied and there is nothing
to prevent Member States introducing new, more favourable provisions in
the future .
Article 9 "to 11
               Article 9 "to 11 contain the final provisions required by the
Treaty establishing the European Economic Community .
 ---pagebreak---                                COUNCIL DIRECTIVE
           on the approximation of the laws of the Member States
              concerning the protection of employees in the event
                      of the insolvency of their employer
THE COUNCIL OP THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Economic Community,
and in particular Article    100 thereof t
Having regard to the proposal from the Commission,
Having regard to the opinion of the European Parliament ,
Having regard to the opinion of the Economic and Social Committee,
Whereas employees' claims arising from the contract of employment are
inadequately protected in the event of their employer "becoming "bankrupt or
otherwise insolvent , particularly since employees, unlike other contracting
parties, are not in a position to protect themselves from the consequences
of insolvency of the other party to the contract by demanding the provision
of security !
Whereas the distributable assets are in many cases not sufficient to meet
outstanding claims arising under the contract of employment even w
these enjoy statutory rights of preference over other claims |
 ---pagebreak---                                   - 2 -
Whereas insolvency proceedings usually take a very long time and their
intrioaoies are difficult for the employee to grasp, with the oonsequenoe
that the satisfaction of his material needs is made more difficult ;
Whereas this situation calls for the creation of special institutions to
safeguard the olaims of the employees conoernedf
Whereas such institutions have been set tip in most of the Member States
but under widely differing terms , whilst in some Member States there are
no special institutions to ensure the protection of employees' olaims in
the event of the insolvenoy of their employer }
Whereas increasing economio interdependence across national boundaries
imposes the requirement that employees * claims arising from the employment
relationship in the event of the insolvency of their employer should receive
equal protection in all Member States , since the existing differences rein­
force social imbalances within the Community and thus have a direct effect
on the functioning of the common market ;
Whereas it is therefore neoessary to promote the approximation of the laws,
regulations and administrative provisions of the Member States while main­
taining the improvement described in Artiole 117 of the Treaty,
HAS ADOPTED THIS DIRECTIVE :
 ---pagebreak---                                    Artide 1
This Directive shall apply to claims arising from employment or training
relationships against insolvent employers whose undertaking or business
is situated within the territorial jurisdiction of the Treaty.
                                   Artide 2
For the purposes of this Directive , an employer shall be deemed insolvent
if :
( a) proceedings have been opened under the laws, regulations and
      administrative provisions of the Membe: States to satisfy jointly
      the claims of creditors, including creditors with claims under
      Article 1 of this directive, from the assets of the employer, or
(b ) an application for the opening of suoh proceedings has been rejected
      on the grounds of lack of assets, or
( o ) his business has been closed down due to insolvency .
                                   Artide 3
Member States shall set up institutions to satisfy the unfulfilled claims
of employees arising before the onset of the employer's insolvency :
( a) to remunerations or to payments arising from a training relationship,
(b ) to other cash or equivalent benefits on the part of the employer in
      connection with sickness, holidays or termination of employment and
      to gratuities, bonuses or indemnities .
 ---pagebreak---                                     Article 4
Member States may limit the liability of the guarantee institutions , but
in no case to less than *
(a) that proportion of the unsatisfied claims under Article 3(a) corres­
      ponding to the remuneration or payments for three months )
(b ) those unsatisfied olaims under Article 3(b ) which have arisen during
      the twelve months preceding the onset of insolvency or have within
      that period formed the subject of execution whioh has not
      satisfied .
                                    Article 5
Member States shall observe the following principles in determining the
guarantee institutions' structure , financing and method of operation :
( a ) the assets of the guarantee institutions must be independent of the
      employer 's business assets and inaccesible to insolvency proceedings ;
(b ) the institutions must not be financed solely by contributions from
      employees )
( c ) payment shall be made on the application of the employee entitled to
      claim . A verbal application shall be sufficient . Applications shall
      be admissible from the onset of insolvency and must be made within
      a period of six months thereafter )
(d ) the guarantee institution's liability towards an employee entitled
      to claim shall not depend on whether the employer concerned has
      fulfilled his obligations towards the institution )
( e ) Member States may only make payment by the institutions dependent on
      claims being either undisputed or substantiated .
 ---pagebreak---                                     Artide 6
Member States shall adopt the measures necessary to ensure that any
failure to satisfy the olaims of social security institutions arising
before the onset of insolvency to compulsory contributions to the
statutory social security schemes in Member States does not adversely
affect employees' benefit entitlement .
                                    Artide 7
Member States shall adopt the measures necessary to protect the interests
of employees and of persons no longer employed in the insolvent
employer 's business at the onset of insolvency within the meaning of
Article 2 in respect of rights arising before the onset of insolvency
conferring on them immediate or prospective entitlement to old-age
benefits ) including survivors' benefits , under supplementary company
or inter-company pension schemes outside the statutory social security
schemes in Member States .
                                    Article 8
This Directive shall not affect the right of Member States to apply or
introduce laws , regulations or administrative provisions which are more
favourable to employees .
                                    Artide 9
1 . Member States shall bring into force the laws, regulations and
    administrative provisions needed to comply with this Directive
    within eighteen months of its notification and shall forthwith
    inform the Commission thereof .
2 . Member States shall communicate to the Commission the texts of the
    laws, regulations and administrative provisions which they adopt in
    the field covered by this Directive .
 ---pagebreak---                                   Article 10
Within eighteen months following the expiry of the eighteen month period
laid down in Article 9 » Member States shall forward all relevant
information to the Commission in order to enable it to draw up a
report on the application of this Directive for submission to the
Council •
                                  Artide 11
Th-'t, Directive is addressed to the Member States .