When a company enters insolvency, it is not just the numbers that are concerned. For workers, reality can change overnight, and often uncertainty settles on salary, subsidies and compensation. The law, however, provides for specific mechanisms to protect who is seen in this situation.
What is insolvency and how it is distinguished from bankruptcy
Insolvency occurs when the company is no longer able to fulfill its obligations with creditors, including workers, because income does not arrive to cover due benefits.
It should not be confused with bankruptcy: Bankruptcy means that the company has more debt than assets, while insolvency results from the impossibility of honoring payments, even if the heritage may be higher than liabilities.
The legal framework
In Portugal, these cases are regulated by the Insolvency and Company Recovery Code (CIRE), approved by Decree-Law No. 53/2004, of 18 March, and successively changed, as the Ekonomist suggests. The diploma gives workers a privileged position in the range of creditors, recognizing the food nature of their credits.
Article 277 of CIRE states that the employment contract does not automatically cease with insolvency. Only in case of collective dismissal or definitive closure of the company can the work relationship end.
How can workers act
The first measure is the claim of credits. Late and Christmas subsidies, food subsidies and compensation for termination of the contract may and must be claimed to the insolvency administrator. The legal deadline is 30 days after the insolvency judgment. Once this period is exceeded, the law also allows a further checking action of credits.
If the company does not have sufficient funds, workers can use the salary guarantee fund, provided for in Law No. 35/2004 and regulated by Social Security, as the same source explains. This fund ensures the payment of part of labor credits, upon request submitted to local or online services.
Priority rights and legal privileges
CIRE attributes to workers special credit privilege on real estate related to the company’s activity (article 333), ensuring that, even before mortgages or other burden, salary credits are precedence. In addition, Article 84 of the Code states that labor credits can be granted as food as the process takes place.
Every day of work provided after the declaration of insolvency is credit on insolvent mass, which reinforces the protection until the company recovers or closes.
Compensation in case of dismissal
If insolvency leads to the closure of the company and consequent termination of contracts, workers are entitled to compensation. The rule, provided for in the Labor Code, establishes the payment of 12 days of base retribution and dulture for each full year of seniority.
To calculate, the monthly salary is divided by 30, the daily value is found. This value is multiplied by 12 for each year of service. In shorter contracts, compensation is proportional to the months worked.
Information and follow -up
Although often unexpected, insolvency should not leave workers unprotected. Among the possibility of claiming credits, resorting to the salary guarantee fund and benefiting from legal privileges, there are instruments that can mitigate the financial impact, as explained.
The essential thing is to act within the deadlines, seek counseling with specialized unions or lawyers and not fail to exercise the rights provided for by law.
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