A bankruptcy petition helps receive unpaid wages

Turbulent times in the economy have pushed many sectors and businesses into financial difficulties, and companies often find that they need to lay off staff and minimise operating costs. When a company lacks funds and hasn’t paid wages, attorney-at-law Robert Sprengk recommends employees themselves to file for the employer’s bankruptcy and thereby recover their pay through the Unemployment Insurance Fund.

The purpose of compensation for the employer’s insolvency is to indemnify employees for the wages and holiday pay they did not receive due to the employer’s insolvency as well as any cancellation benefits as set out in the Employment Contracts Act.

In which cases should the employee file for the employer’s bankruptcy?

Attorney-at-law Robert Sprengk advises the employee to file for the employer’s bankruptcy if the employee has not been paid for several months, the employee is aware that the employer is insolvent and the company’s management has not initiated bankruptcy proceedings themselves. “Filing for bankruptcy is an alternative for the employee if the employer fails to pay them for their work,” said Sprengk, “because then the Unemployment Insurance Fund will compensate the employee for the lost salary. It should be noted that a bankruptcy caution has to be filed before a bankruptcy petition can be submitted. Filing a petition will also give the desired result if the company has already been sold on to liquidators.”

A bankruptcy petition is also a solution for those employees who have won in the labour dispute committee or in court but the bailiff has nothing to take from the company – even in such a case, the lost wages can be received from the Unemployment Insurance Fund through a bankruptcy petition.

A state fee of 10 euros is paid upon filing a bankruptcy petition by an employee against the employer based on a claim arising from the labour law relationship.

How many months of unpaid wages can I claim through the Unemployment Insurance Fund?

An employee will receive a benefit for wages not paid in an amount equal to up to the employee’s gross wages for the last three months of work but not exceeding in total, according to the data published by the Statistics Estonia, the amount equal to three average gross monthly wages in Estonia during the calendar quarter before the employer was declared insolvent. An employee is also paid a benefit up to the extent of the employee’s one month’s holiday pay but not exceeding one average gross monthly wage in Estonia. However, if the employee’s wage claim against the employer is higher than the benefit paid by the Unemployment Insurance Fund, the employee may file a claim for the remainder in bankruptcy proceedings.

The term for filing a claim for wages is three years as of the time the wages fell due.

The article was also published in Ärileht and Pealinn.