The increasing number of corporate insolvencies poses significant challenges for both employees and HR managers. Dr. Elke Trapp-Blocher, a specialist lawyer for employment law at Schultze & Braun, predicts that the rise in insolvencies will continue into 2025. This development not only creates uncertainty for employees but also raises numerous employment law questions. Is the employment contract still valid? Can employees be dismissed more easily? And what about salaries?
"No company is immune to economic setbacks, and anyone can be affected by their employer's insolvency," explains Dr. Trapp-Blocher.
Despite the frequent uncertainty associated with insolvency applications, she emphasizes that there are no legal voids even in insolvency proceedings. Employees enjoy a special status, and their employment situation changes — but not completely.
The most important employment law changes in insolvency
The filing for insolvency marks a period of uncertainty for employees.
Questions like "Is my employment contract still valid?" or "Will I still receive my salary?" are among the most common concerns. HR managers must address these questions to properly inform and support the workforce.
A key point is the role of the insolvency administrator, who usually assumes the employer's position after the opening of the insolvency proceedings. However, even in preliminary insolvency proceedings, the administrator can make initial decisions. This includes dismissals or determining who acts as the employer. Once the proceedings are opened, the insolvency administrator generally takes over all employer responsibilities.
Additionally, employees must prepare for changes in their salary situation. While insolvency benefits are still paid by the employment agency before the proceedings open, all salary claims are treated as insolvency liabilities after the proceedings begin. This means they will be paid from the insolvency estate — regardless
of whether the employee continues to work or is exempted.
Holiday entitlements and termination regulations in insolvency
Another important point concerns holiday entitlements. These generally remain intact during insolvency, with holiday compensation usually claimed only after the end of the employment relationship. Even if the employment relationship ends during insolvency proceedings, the holiday entitlement remains and is treated as an insolvency liability.
Regarding dismissals, there is a clear rule: an insolvency administrator cannot terminate an employment contract solely due to insolvency. Terminations are only possible if there is a reason such as a business closure. Employees also face reduced notice periods in insolvency — a maximum of three months to the end of the month. If the employee terminates the contract, these notice periods also apply.
Social plan and exemption
In certain cases, employees may be exempted during insolvency proceedings. However,
this measure is not arbitrary but must occur within the framework of "reasonable discretion." Social plans can also play a role, but benefits in insolvency proceedings are usually limited. Severance pay depends on various criteria such as age, length of employment, or severe disability.
Conclusion: The special status of employees
Dr. Trapp-Blocher emphasizes that employees occupy a special position in insolvency. On the one hand, their employment relationship continues; on the other hand, they must adapt to significant employment law changes. HR managers are called upon to engage with the implications of insolvency early, to best inform their employees and provide necessary support.
"In the case of insolvency, the jobs in the HR department are also at stake," emphasizes Dr. Trapp-Blocher. Proper preparation can help reduce uncertainty among employees and contribute to stabilizing the company — even in economically challenging times.
