1. Introduction
Where an employer becomes insolvent, employees may face the loss of unpaid wages, holiday pay, statutory minimum notice and other entitlements. The Protection of Employees (Employers’ Insolvency) Act 1984, as amended, establishes a statutory scheme through which the Social Insurance Fund will, in certain circumstances, pay arrears owed by an insolvent employer.
This article considers the scope of the insolvency scheme, the entitlements that fall within it, and the procedural steps that must be taken to access payment.
2. Legislation and Case Law
Section 6 of the Protection of Employees (Employers’ Insolvency) Act 1984 provides that the Minister for Enterprise, Trade and Employment may pay, from the Social Insurance Fund, sums owed to employees of an insolvent employer in respect of arrears of pay, holiday pay, sick pay, statutory minimum notice and certain other entitlements.
Section 4 defines insolvency by reference to a range of formal procedures including liquidation, receivership and bankruptcy. The protection is not engaged simply because the employer is in financial difficulty; a formal insolvency event must have occurred.
The scheme is subject to statutory ceilings: the maximum weekly amount is capped at the equivalent of one ceiling on weekly earnings under the Redundancy Payments Acts, and arrears more than eighteen months before the insolvency are generally excluded.
The European Insolvency Directive 2008/94/EC requires Member States to maintain guarantee institutions of this kind. The Court of Justice in Robins v Secretary of State for Work and Pensions C-278/05 confirmed that the protection must be effective and not merely nominal.
3. Decision
Where an insolvency has occurred and the liquidator or receiver has been appointed, employees should submit Form IP1 to the Department of Social Protection setting out their claim. The Department will assess the claim by reference to records held by the insolvency practitioner.
Where the Department refuses or under-pays a claim, an employee may bring a complaint to the WRC under the 1984 Act. The WRC will examine whether the entitlement falls within the scheme and whether the calculation is correct.
Separate complaints under the Payment of Wages Act 1991 may also lie against the employer entity, although recovery from an insolvent employer is typically not possible.
4. Takeaway
Employees of an insolvent employer should engage promptly with the appointed insolvency practitioner and submit Form IP1 as soon as possible. Delay can complicate the assessment of the claim.
Practitioners advising employees should consider all potential routes including the insolvency scheme, the Payment of Wages Act, redundancy entitlements and (where relevant) the personal liability of directors where the protections under company law have been engaged.
5. Further information
This article was prepared for informational purposes only. For further advice, please email enquiries@crushell.ie or contact the offices of Crushell & Co Solicitors.
6. About Crushell & Co
Crushell & Co is a specialist law firm focused on protecting and advancing the rights of employees in Ireland. We offer a nationwide service, advising individuals on a wide range of legal and regulatory issues arising at work, including employment law, employment immigration and workplace accidents and injuries.
We help employees understand their position and options by translating complex legal issues into clear, practical advice. Our approach is tailored to each client, ensuring that our strategy is aligned with their personal and professional circumstances.
Connect: @CrushellLaw or www.wordpress-576593-6594403.cloudwaysapps.com
