Bankruptcy and redundancies

Bankruptcy and redundancies

On the day of the declaration of bankruptcy, the debtor loses the right of management. All activities related to the bankruptcy estate are performed by the bankruptcy trustee, including activities related to the performance of the employer’s functions. On the day of declaring bankruptcy, the bankruptcy trustee takes over the duties and rights of the employer resulting from the Labour Code and other regulations concerning the rights and obligations of the employer and employees (Resolution of the Supreme Court of 24 March 1994, ref. no. I PZP 5/95, and the judgment of the Supreme Court of 18 June 2002, ref. no. I PKN 171/01).

As a result of declaring bankruptcy, it is possible to shorten the notice period. The bankruptcy trustee as an employer has the right to terminate the employment contract earlier and shorten the three-month notice period, however, to 1 month at the most (Article 361 of the Labour Code). Shortening the notice period pursuant to Article 361 of the Labour Code causes the employment contract to be terminated at the end of the shortened period, and for a later period the employee receives compensation. Apart from receiving compensation, the dismissed employee does not, however, acquire the right to benefits that would be due to him in connection with the employment relationship.

The declaration of bankruptcy results in the revocation of protection against dismissal (Art. 39 and 41 of the Labour Code). The bankruptcy trustee is not obliged to notify trade unions in writing about the intention to terminate the employment contract to employees employed for an indefinite period of time (Article 38 of the Labour Code). The lack of protection against termination of the employment contract also applies to pregnant women (Art. 177 §4 of the Labour Code). However, pregnant women are entitled to certain rights, e.g. the date of termination of the employment contract is agreed with the trade union organisation. If there is no such organisation, the date of termination of the employment contract may be determined by us. This period may not be shorter than the end of the notice period. In addition, until the day of childbirth, the employee is entitled to a allowance in the amount of maternity allowance pursuant to Article 30(3) of Act on cash benefits from social insurance in case of sickness and maternity.

In the event that the bankrupt employs at least 20 employees, the bankruptcy trustee is obliged to apply the procedures related to group redundancies. At the same time, it should be pointed out that group layoffs may be referred to when the receiver terminates the agreement:

– 10 employees, if the employer employs less than 100 employees,
– 10 % of employees where the employer employs at least 100 but less than 300 employees,
– 30 employees where the employer employs them at least 300 or more.

When making collective redundancies, the bankruptcy trustee is obliged to observe appropriate procedures, i.e. consultation with employees, reporting information on collective redundancies to the employment office, and is also obliged to pay severance pay.

The severance pay paid by the bankruptcy trustee depends on the duration of the employment relationship in the bankrupt company and may range from monthly to even three months’ remuneration (Article 8 of the Act on Special Rules for Terminating Employment Relations with Employees for Causes Not Relating to Employees). Severance pay or outstanding remuneration in case of employer’s insolvency may also be paid from the Guaranteed Employee Benefits Fund (FGŚP).

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