10.2 Wage

There is a broad spectrum of laws and regulations with regard to entitlement to wage c.a. of employees of an insolvent employer. Based on the foregoing, the rules;

In addition, the regulations are characterized by a different personal, substantive and temporal scope.

This has led to a widely varied set of rules and regulations, which is unfortunate because consequently this leads to uncertainty and a lack of clarity, which at the same time is hard to completely avoid. It is relatively logical that wage guarantee schemes with a semi-public institution like UWV as the executive party has a public-law character, as opposed to the civil-law rules from the Bankruptcy Act and the Civil Code. Moreover, the legislator was faced with European guidelines when the Dutch legislation already existed. However, this does lead to problems, especially now that the rules as recalled, also differ in substantive, personal and temporal scope.

It is established that there are quite substantial differences and discrepancies, however at the same time the common factor in all of this is that all regulations are based apparently on the broadly felt necessity to provide employees with additional protection in case of insolvency of their employer and that this desire is inspired by the above-average weak (social) position employees have compared to other creditors. It has been concluded that there is a somewhat incoherent set of rules, the rationale of which is to offer employees of an insolvent employer a minimum of guarantees to ensure that the bankrupt employer’s financial obligations are fulfilled to a certain extent.

The first sub-conclusion that can be drawn is that there are considerable lacunae between respectively the preferential right of book 3 of the Civil Code and the wage guarantee scheme of the Unemployment Insurance Act. On this point, I concluded that both in terms of legal certainty and systematically, it would be much better to smooth out the identified gaps as much as possible by repealing the preferential right to wage. The much broader debate about the abolition of several preferential rights, including the tax authorities’ position and its seizure right, emerges from time to time, however it lacks decisiveness and political support for a far-reaching and complete revision or reassessment in general of the system of preferential rights. I therefore think we shouldn’t be too afraid to take the next step towards the abolition of the employee’s preferential rights. In doing so, I emphasize the arguments given earlier for maintaining preferential rights to wage were relatively pragmatic and hardly fundamental, as they relate to lacunae in the wage guarantee scheme, which I think can be resolved (and for which I have formulated recommendations). It should not be forgotten that the employee’s preferential right has degenerated into a preferential right of the UWV, because in practice the UWV benefits from the claim for wages’ preference character much more than an employee at the individual level, since the UWV takes over the claim based on the right of recourse from the Unemployment Insurance Act (article 66). A preferential right as such for a public body has been debated in detail; however, to me, the arguments for maintaining this right are no longer valid. Abolition of said preferential rights for that matter is not an infringement of the claims the UWV has, now that they are privileged according to article 66 paragraph 3 of the Unemployment Insurance Act (not article 3:288 of the Civil Code) and the preferential character will continue to apply for the UWV.

A first recommendation is therefore to repeal the privilege/benefit/preferential right of article 3:288 (sub c-e) Civil Code.

In addition to repealing the privilege of wages and adjusting the wage guarantee scheme to a number of less prominent aspects (for which I refer to chapter 3), I came to the conclusion that art. 40 of the Bankruptcy Act requires adjustment. I believe a distinction has to be made between, on the one hand, wages owed to employees whose services are still used by the trustee in bankruptcy or trustee (in Dutch: 'curator'), regardless of whether this is limited to the notice period, or that the employment has not yet been cancelled, and, on the other hand, wages of the employees whose employment contracts are terminated immediately, but who are exempted from the obligation to work. This also does justice to the relationship between creditors of the insolvent company and ordinary bankruptcy creditors, as well as to the reduction of estate debts (in Dutch ‘boedelschulden’), which is a fairly widely supported wish in legal literature, recurring in legislative processes, as was evident from the 2007 Preliminary Draft of the Insolvency Act. The first category of wage agreements for employees concerns estate debts; the second should legally be labelled as a bankruptcy debt, because if it would not be labelled as such then it would be a non-verifiable claim, which should be avoided.

Article 40, paragraph 2 of the Bankruptcy Act would then read as follows: