Once insolvency proceedings are declared in respect of an employer, the management of the employer is thereafter carried out by the insolvency administrator (hereinafter – administrator). Accordingly, if the employer has not paid wages to a current or former employee, the employee must submit a creditor’s claim to the administrator within the time limits specified in the Insolvency Law (namely, within one month from the date on which an entry on the declaration of the employer’s insolvency proceedings is made in the Insolvency Register; if the one-month time limit is missed, the creditor may submit the claim within a period not exceeding six months and no later than until the preparation of the creditors’ claims satisfaction plan). After the expiry of this time limit, a limitation period sets in, and the creditor loses creditor status and the right to the claim.
A creditor’s claim may be submitted using the e-service of the Electronic Insolvency Accounting System, or by sending it by post to the address of the administrator’s place of practice, or by sending it to the administrator’s email address (signed with a secure electronic signature). After submission of the creditor’s claim, the administrator examines it and adopts a decision on recognition, partial recognition, or non-recognition of the claim.
Only after the employee has acquired the status of a full-fledged creditor of the insolvent employer may the administrator apply to the Insolvency Control Service with an application for satisfaction of the employee’s claim from the Guarantee Fund.
At the same time, if an employee considers that the administrator has infringed his or her lawful rights, the employee has the right to submit a complaint to the Insolvency Control Service regarding the administrator’s actions, indicating the facts and circumstances of the alleged violation.
Within one month of receipt of all documents, the Insolvency Control Service decides on the allocation of funds for the satisfaction of employees’ claims or on refusal to allocate such funds. It is important to note that the Insolvency Control Service does not assume the employer’s debts to employees, and the amounts calculated by the employer are not always covered in full from the Guarantee Fund, as employees’ claims are satisfied in a limited amount and for a specific period in accordance with the provisions of the Law "On the Protection of Employees in the Event of Employer Insolvency".
The following employee claims are satisfied from the Guarantee Fund:
- Wages – for the last three months of the employment relationship within the 12-month period prior to the occurrence of the insolvency event;
- Compensation for annual paid leave – for which the entitlement was acquired within the 12-month period prior to the occurrence of the insolvency event;
- Compensation for other types of paid absence – for the last three months of the employment relationship within the 12-month period prior to the occurrence of the insolvency event;
- Severance pay – in the minimum amount prescribed by law, where the entitlement was acquired no earlier than within the 12-month period prior to the occurrence of the insolvency event;
- Compensation for damage in connection with an accident at work or an occupational disease – for the entire unpaid period up to the date of the occurrence of the insolvency event (payable to employees), and the amount of compensation for damage for four years following the occurrence of the insolvency event (to be transferred to the special budget).
Accordingly, it should be taken into account that the Guarantee Fund does not ensure that the insolvent employer’s debts to the employee will be covered in full, but only to the extent provided for by the applicable legal framework. Any remaining debt owed by the employer to the employee may be covered from the proceeds of the sale of assets within the insolvency proceedings, in compliance with the order of satisfaction of creditors’ claims laid down in the Insolvency Law in legal entity insolvency proceedings.