Date Released: 16 January 2013
The Protection of Employees (Employers Insolvency) Act 1984 provides certain protections to employees when their employer becomes insolvent. The Insolvency Payments Scheme, which is governed by this legislation, is operated by the Department of Social Protection.
The types of payments covered by the scheme include: arrears of pay, holiday pay, pay in lieu of notice, arrears due under an Employment Regulation Order (ERO) or Registered Employment Agreement (REA), certain pension contributions not paid into the employee’s pension scheme and payments due under employment legislation which are the subject of an award by a third party, such as a Rights Commissioner, the Employment Appeals Tribunal or the Labour Court and others.
Employees who are fully insurable for social insurance purposes (paying full PRSI) and whose employer is insolvent as per the legislation may qualify for payment from the scheme.
Under the legislation an employer is insolvent if their business is in liquidation or receivership or if the employer is legally bankrupt or has died and the company is insolvent. When a payment is made from the Insolvency Payments Scheme to an employee, the money that was owed by the employer to the employee is then owed to the Minister of Social Protection.
Dilemma – access denied
Therefore, in order to access this scheme, two criteria have to be met: the employee must be fully insurable and their employer must be insolvent.
In theory, this should be relatively straightforward. Well, it’s not and here is the dilemma.
Some of our members have experienced circumstances where their ex-employers have not put the company into insolvency as per the legislation but have simply “walked away” from the company leaving our members with wages and other payments owed to them.
In these circumstances, even though the employee is still due any one or more of the payments listed above, they cannot access the Insolvency Payments Scheme.
While the employee may tick the right box by being fully insurable, they are denied access to the scheme because of the inaction of their exemployer.
This experience has been felt across sectors – from hotels to construction – and across the country.
In even more extreme circumstances, some members have seen their employer walk away from the company they work for, leaving them with monies owed before starting another business in the same town!
Call for change
The Irish Congress of Trade Unions and SIPTU have made submissions and representations to the Department of Social Protection to extend the definition of insolvency to include instances where the employer does not comply with their obligations, based on the belief that our members should not suffer as a result.
There are a number of ways to remedy this unfairness. In fact, the existing legislation contains a section which technically allows the Minister by regulation to extend the definition of an insolvent employer.
This shows that the legislature envisaged the law being extended to cover other situations.
It is our view that where it is established that our members have kept their side of the bargain – by being fully insurable – they should be assured they will also receive payment from the Insolvency Payment Scheme.
We continue to seek that this measure is afforded to employees who – through no fault of their own – have not only lost their jobsbut also have had wages and other money due to them withheld from them.
Article written by Rachel Ryan of the SIPTU Legal Rights Unit.