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1 Insolvency and Social Protection 1 Argentina Written notice of dismissal at least one month in advance Certain claims for amount owed for work performed have 1 ST priority over all creditors. Other employee claims for generally privileged labor credits have 3 rd priority. Australia Priority over unsecured debts and claims. Wages and superannuation contributions, injury compensation, and retrenchment payments. EESS provides eligible employees payments upon insolvency of the employers (between 1/1/2000 and 09/11/01). It is subrogated to the claim of the employee against the employer. After Sept. 11, 2001, GEERS applies. In addition, employers must purchase insurance to protect employees entitlements. EESS: Payments to $20,999, unpaid wages, annual leave and redundancy pay up to 4 weeks, pay instead of notice up to 5 weeks, long service leave up to 12 weeks. GEERS: $A75,200 for ; A$81,500 for Belgium No Employers having 20+ employees must notify the employees and the government. If the contract is terminated immediately, the salary and benefit claims must be made within 15 days of the close of business. Fund for closures

2 Insolvency and Social Protection 2 Brazil Priority over all other creditors claims. Compensation for workrelated injuries has the highest priority of all employee claims, followed by salaries, vacation pay, and bonuses. Canada No Written notice or pay. If lay-off is temporary, or short term, advance written notice or reason for lay-off is not required. However, a recall date must be set. Preferred status over unsecured creditors, except entitlements for severance and termination pay. Salaries, wages, commissions, and vacation pay during the 6-month period prior to bankruptcy. According to OBCA and CBCA, Directors are jointly and severally liable for employee wages and vacation pay. Unpaid wages, vacation or termination pay may be claimed under Canadian Employment Standards Act, but may not protect an employee if the employer has begun bankruptcy proceedings. Directors are personally liable for up to 6 months of vacation pay under OBCA and 6 months of wages under CBCA. China Claims of employees are settled first. This method has been criticized, as creditors and affected workers are treated inconsistently. Unemployment Insurance System for staff workers of state-owned enterprises will pay dismissed employees 70-80% of the national minimum wage for 2 years. Denmark Yes, they follow costs of bankruptcy Proceedings and costs acquired by Debtor during the suspension period. Salaries, wages, and other benefits owed to the employee. Employees Pay Guarantee Fund Additionally protects employee claims for wages, vacation pay, and severance pay earned during the 6 months before the bankruptcy proceedings. If the fund pays out, it becomes subrogated for the employee s claim against the employer. Finland No, insolvency does not create grounds for dismissal, either. Up to EUR15,137 Wages Wage Guarantee System funded by employers. When the government pays out employee claims on behalf of the insolvent employers, employers are to repay the government within 10 years, unless their financial standing would render repayment unreasonable.

3 Insolvency and Social Protection 3 France No First priority / superprivilege over other secured creditors. Up to a certain limit Wage Guarantee Insurance Germany No With proper notice Partial. Before insolvency, unsecured; after insolvency, secured. Depends on the social welfare plan. A formal social welfare plan may be established. Maximum ⅓ of all assets available to creditors. Hong Kong Preferential claims Wages, severance pay, payment for lack of termination notice and holiday pay. Wages and severance pay up to HK$8,000, lack of termination notice, up to HK$2000 or one month s pay, entire amount of holiday pay. Employees are entitled to payments from Protection of Wages on Insolvency Fund (PWIFB). Up to HK$36,000 for wages, HK$22,500 for payment in lieu of notice, HK$50,000 or 50% of any claim over that amount for severance pay, nothing for lost holiday. India Highest priority, even over secured claims. Owed wages or salaries, accrued holiday pay, amounts owed under Workmen s Compensation Act, and pension fund benefits. Ireland No. Insolvency does not create proper grounds for dismissal, either. Wages, holiday, and sick pay, maternity leave, wrongful dismissal. Social Insurance Fund Up to a certain amount Italy No Proper notice In insolvency, reduced production, or restructuring, only collective dismissal is allowed. Employers must notify their employees of these dismissals in writing and contribute to the INPS the cost of up to 9 months availability allowance for each dismissed employee. No, unsecured general status Wages Insurance Fund Protects the income of employees of insolvent employers by paying up to 80% of their lost wages.

4 Insolvency and Social Protection 4 Japan Preferred status for employee s unpaid wages claims over other debts of employer, but not over secured debts, such as tax payments and mortgages. Salary, severance pay, and bonuses. Salaries earned 6 months prior to bankruptcy (even if bankruptcy court decides to discharge certain debts of the debtor), ⅓ of retirement allowance. Law concerning the Security of Wage Payments provides employees with additional payments from the government if the employer fails to cover the claims. No limit on the amount, but civil code states that up to 6 months of unpaid wages may be claimed. Mexico First priority for wages owed within 2 years prior to employer s bankruptcy. Three months salary or wages and seniority payment of 12 days pay for each year of employment. No private or government-sponsored unemployment insurance schemes. Netherlands Permission from government is required in collective dismissals in the event of bankruptcy. Yes, employee claims are settled before the rest of the creditors claims. Full-time employees entitled to up to 13 weeks of wages, unpaid leave entitlements, and termination pay of up to 6 weeks. If an employer is unable to pay, the Unemployment Act of 1949 pays the claims from the Netherlands social security system. NOTE: Employee entitlements in existing private funds are not affected by the employer s insolvency. New Zealand Not necessarily. The official assignee may require an employee to continue to work anyway. Preferential claim Wages, salary, and related earnings. Four months prior to employer s insolvency and up to $NZ6,000; amounts outstanding are ordinary claims. In late 2001, the first insolvency law changes were announced in which employers would soon be able to make priority claims up to NZ$15,000 and employee redundancy payments would soon be given priority status. In the first half of 2002, the second stage of review of insolvency laws took place, and a Bill specifying the proposed changes should come before in Parliament in the near future.

5 Insolvency and Social Protection 5 Norway No Yes, claims for up to 6 months wages or pensions maintain priority in debt, second only to the claims for the bankruptcy proceedings costs. Up to 6 months wages (but must be within 4 months of the ankruptcy filing), holiday remuneration of up to 30 months worth (must have arisen within the 24 months prior to bankruptcy). Wages, pensions, holiday remuneration Wage Guarantee Scheme administered by the government OHADA Employers may be held personally liable. Wages must be paid within one year. Philippines Russian Federation Written notice to the workers and the Dept. of Labor at least one month prior to the termination date. In addition, termination pay equal to at least one month s pay or one month s pay for every year of service, whichever is higher. Preferential status, although there are disagreements about the interpretation of the law. Maintain preference and subordinate the claims of other secured creditors. Salaries and wages. State Development Fund in the making to protect further employee entitlements. South Africa Yes, insolvency terminates all employment contracts. The current Insolvency Amendment Bill seeks to remedy the plight of the employees and trade unions by advance notice of liquidation. It additionally provides for a 45-day period during which employment contracts will be suspended, employees will be able to make claims against

6 Insolvency and Social Protection 6 United Kingdom No The preferential debt category Includes social security contributions, contributions to occupational pension plans, and remuneration of employees. Lesser of 800 or 4 months unpaid wages and accrued holiday/sick pay. If not possible, then division of profits from its remaining assets among employees. Secretary of State for Employment / National Insurance Fund (NIF). NIF covers: arrears of 1-8 weeks pay, amounts accrued due to the failure to give proper period of notice, holiday pay, compensation for unfair dismissal, fees paid by an articled clerk. United States WARN applies to employers with 100 or more full-time employees or parttime employees whose weekly hours amount to 4,000. Requires employers to give employees 60 days written notice before the mass layoffs and/or close of the business. First priority after filing for bankruptcy. Claims arising before the commencement of bankruptcy have the same status as unsecured creditors (3 rd priority). Contributions to employee benefit plans have 4 th priority. Up to US$4,000, which must arise in the 90 days prior to bankruptcy filing. Benefit plan contributions of up to US$2,000 must relate to the period within 180 days of the bankruptcy or termination of business. Earned wages, salaries, commissions, vacation pay, sick leave pay, severance pay, and contributions to employee benefit plans. Single and multi-employer pension plans are guaranteed by the Pension Benefit Guarantee Corporation (PBGC). PBGC takes over the single employer s obligation to pay guarantee benefits up to the statutory maximum amount. PBGC then gains an unsecured claim against the debtor. With a multiemployer plan, if the entire plan becomes insolvent, PBGC pays the guaranteed benefits up to US$6,000 per year. the insolvent estate, and the trustee will attempt to reach a rescue plan. If approved, the Act will allow employees to have preferential claims for severance benefits up to R12,000.