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Minister for Enterprise, Trade and Employment, Peter Burke, and Minister of State for Business, Employment and Retail, Emer Higgins, have today published the General Scheme of the Protection of Employees (Employers’ Insolvency) (Amendment) Bill 2024.
The Bill will make changes to the Insolvency Payments Scheme, which protects employees’ pay-related entitlements if their employer becomes insolvent.
The Bill will:
Announcing the General Scheme’s publication, Minister Burke said:
"I am very pleased that Government has agreed to the drafting of this legislation. We already have a strong safety net for employees to ensure they are protected if their employer becomes insolvent.
"For the first time, we are expanding this protection to include workers whose employers have ceased trading without formally winding up. While these situations are not common, affected employees will now have a clear process to have their former employer deemed insolvent for the purpose of claiming their outstanding entitlements from the Scheme.
"Once the Bill is enacted, this new Employer Deemed Insolvent Application will ensure all employees have their rights vindicated in Irish law."
Welcoming the government decision, Minister Higgins said:
"These proposed changes to the Insolvency Payments Scheme will really help employees. If your employer walked away without formally winding up their business and you were left owed money, whether this happened five or twenty years ago, we are giving you an opportunity to apply to reclaim this money from the State, via the Historical Employer Deemed Insolvent Application.
"While the legislation is being prepared, my department will continue to work on a comprehensive information campaign to make sure the process is a simple as possible, and everyone can easily understand if they are eligible."
The General Scheme will now be referred to the Office of the Attorney General for drafting of the Bill.
The Insolvency Payments Scheme protects certain outstanding pay-related entitlements due to employees in the event of the insolvency of their employer. The entitlements covered include wages, holiday pay, sick pay, payment in lieu of minimum notice and certain pension contributions. Various other statutory employment rights awards made by the Workplace Relations Commission and Labour Court are also covered by the scheme.
The Insolvency Payments Scheme is administered by the Department of Social Protection on behalf of the Minister for Enterprise, Trade and Employment. Payments from the Insolvency Payments Scheme are made from the Social Insurance Fund.
Access to the Scheme is contingent on the employer being legally insolvent. This means a company entering into liquidation or receivership; a sole trader being declared bankrupt; the employer has died and their estate is insolvent; or the employer being deemed insolvent in another EU Member State or the UK.
In 2022, €4.638 million was paid out to employees from the Insolvency Payments Scheme.
Under Article 2(1) of Directive 2008/94/EC, Member States are required to provide for a scenario where an employer has ceased trading but has not formally wound up their business (for example by entering into liquidation or bankruptcy) because the available assets are insufficient to warrant the opening of proceedings. In December 2018, the Supreme Court decision in Glegola ruled that Ireland has not properly transposed the Directive.
The new Bill provides for an Employer Deemed Insolvent Application, where an employee can follow a process to have their employer deemed insolvent for the purpose of claiming their outstanding entitlements from the Insolvency Payments Scheme.
The new Bill also provides for a Historical Employer Deemed Insolvent Application. This will cover employees impacted by the Glegola judgment during the period October 1983 (the original Directive transposition date) up to the commencement of the Bill. This Historical Employer Deemed Insolvent Application will be open for applications for the first two years following the Bill’s commencement.
Certain limits are applied to payments from the Social Insurance Fund via the Insolvency Payments Scheme.
Arrears of wages, holiday pay and sick pay entitlements are capped at 8 weeks each. Payments from the scheme are generally subject to a salary ceiling, currently €600 per week.
In 2019, the Court of Appeal found that certain employment rights awards should not have the salary ceiling applied to them.
The Bill will amend the underpinning legislation to restore the longstanding policy approach, whereby all payments from the scheme are subject to the salary ceiling.
Further information on the Insolvency Payments Scheme is available at gov.ie/insolvency.