Wage claims: super-priority claims
The principle?
In the context of a collective procedure, the employee is particularly protected: he is not an ordinary creditor.
What protections are there?
A major privilege regarding wages: employees do not have to declare their claims, unlike other creditors, and will be paid in priority over other creditors
A guarantee of payment of wages by the AGS, which advances the funds under certain conditions, when the company does not have sufficient cash flow.
AGS: presentation
The AGS is a guarantee fund whose objective is to prevent employees from not being paid or from waiting to be paid in the event of collective proceedings:
According to Article L.3253-6 of the Labor Code , employees, including those posted abroad or expatriates, are insured against the risk of non-payment of sums due to them in execution of the employment contract in the event of safeguard, reorganization or liquidation proceedings.
Subsidiary nature of the intervention of the AGS: it is only in the absence of funds available in the company that the agent draws up a statement of claims which will be sent to the CGEA (management center) which will make advances to the agent/judicial liquidator on behalf of the AGS.
AGS: Claims and guarantee periods (general information)
AGS insurance covers:
Wages/severance pay prior to the RJ or LJ judgment;
Severance pay if the dismissal has taken place:
- during the observation period;
- within one month of the judgment that approves the safeguard, reorganization or transfer plan;
- within 15 days following the liquidation judgment; during the provisional continuation of the activity authorized by the liquidation judgment;
Claims arising from the termination of the employment contract of employees to whom the personalized redeployment agreement was offered;
In the event of a judicial reorganization, up to a limit of one and a half months of work, the sums due:
- during the observation period;
- within 15 days following the liquidation judgment or within one month following the judgment of
- liquidation for the employee representatives provided for;
during the provisional continuation of the activity.
AGS: Warranty Limits
Limits of coverage?
AGS coverage is limited to a ceiling.
The maximum amount varies depending on the length of the employment contract on the date the insolvency proceedings are initiated:
< 6 months – Ceiling 4 = 54,848 euros
> 2 years – Ceiling 5 = 68,560 euros
> 2 years – Ceiling 6 = 82,272 euros
Dismissal in receivership or liquidation
The principle?
The opening of collective proceedings does not automatically lead to the termination of the employment contract.
The dismissal procedure?
The procedure will differ depending on the following situations:
Dismissals to take place during the observation period (RJ) and the period of continued activity (LJ) or after the adoption of the plan (RJ) or the pronouncement of the LJ;
Collective redundancies of – 10 employees or of at least 10 employees in companies with a minimum of 50 employees, over a period of 30 consecutive days (obligation to establish a PSE).
Dismissals during the observation period in the event of receivership (=dismissals that are urgent, unavoidable and essential) and during the period of provisional continuation of activity in judicial liquidation |
Dismissal following the adoption of the restructuring/transfer plan |
Dismissal under the LJ scheme without continuation of activity |
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Layoffs of – 10 employees |
Redundancies of more than 10 employees (PSE) |
Layoffs of – 10 employees |
Layoffs of more than 10 employees |
Layoffs of – 10 employees |
Redundancies of more than 10 employees (PSE) |
| 1- Information and consultation of the Works Council | 1- Information and consultation of the Works Council | 1- Information and consultation of the Works Council | 1- Information and consultation of the Works Council | 1- Information and consultation of the Works Council | |
| 2- Information from the Direccte and preparation of the PSE (negotiations with the CSE) | 2- Information from the Direccte and preparation of the PSE (negotiations with the CSE) | 2- Information from the Direccte and preparation of the PSE (negotiations with the CSE) | |||
| 2- Application for authorization to the supervising judge accompanied by the opinion of the CSE | 3- Application for authorization to the supervising judge accompanied by the opinion of the CSE + decision of the Direccte | 2- Adoption of the reorganization plan/transfer plan by the Commercial Court | 3- Adoption of the reorganization plan/transfer plan by the Commercial Court | 1-Liquidation order issued by the commercial court | 3- Liquidation order issued by the commercial court |
| 3- Order of the supervising judge authorizing the dismissals | 4- Order of the supervising judge authorizing the dismissals | 4- Notification of the PSE to the DIRECCTE | 2- Information from the Direccte | 4- Information from the Direccte and preparation of the PSE | |
| 3- Information and consultation of the Works Council | 5-Information and consultation of the Works Council | ||||
| 4- Redeployment searches | 3- Search for redeployment opportunities | 5- Job reassignment search | 4- Search for redeployment | 6- Search for redeployment | |
| 7- Notification of the PSE to the Direccte accompanied by the consultation report | |||||
| 5- Preliminary interviews + CSP proposal | 4- Preliminary interviews + CSP proposal | Preliminary interview unless the company has employee representatives | 5- Information prior to dismissal |
8- Information prior to dismissal
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| 6- Notification of dismissals | 5- Notification of dismissals | 5- Notification of layoffs within one month of the plan's adoption | 6- Notification of layoffs within one month of the plan's adoption | 6- Notification of dismissals within 15 days of the liquidation judgment | 9- Notification of dismissals within 15 days of the liquidation judgment |
Consequences of judicial transfer on employment contracts
The principle?
The sale, even partial, of the company may be ordered pursuant to Articles L 626-1 (safeguard), L 631-22 (RJ) or L 642-2 (LJ) of the Commercial Code and entail the transfer of an autonomous economic entity retaining its identity.
The consequences?
Automatic transfer to the transferee of the existing employment contracts of the transferred entity:
- Automatic transfer: no formalities are required except for informing and consulting the CSE and, in companies with fewer than 250 employees, informing the staff;
- Continuation of the contract under the previous conditions (qualification, remuneration, seniority, accrued paid leave, etc.);
- This transfer is mandatory for employees, who cannot oppose it.
As an exception, the transfer of employment contracts does not apply to dismissed employees:
- During the observation period;
- As part of the transfer plan approved by the judge
