Reconstruction and Bankruptcy

When your employer goes bankrupt, there are several factors to be aware of, and we will try to provide you with an overview of these.

In addition to the risk of losing your job, you may also not receive your outstanding payments (wages, travel expenses, reimbursements, etc.).

However, most employees eventually receive the wages they are owed through the Wage Guarantee Fund (Lønmodtagernes Garantifond). PROSA can offer you advice and concrete assistance in handling cases that arise in situations involving bankruptcy. If you wish, PROSA can also provide you with a loan during the period you are waiting to receive your payments from the Wage Guarantee Fund.

This area is governed by extensive regulations, and failing to act at the right time can have serious financial consequences for you. Therefore, if you are facing unpaid wages, reconstruction, or bankruptcy, you should contact PROSA for guidance. Below is an overview of various situations and what you should be aware of:

When wages are not paid

Unfortunately, it happens that a company cannot pay your wages or that your wages are paid late. When wages are not paid, your employer is breaching the terms of employment. It is crucial that you respond in such a situation, as failure to do so might be interpreted as acceptance.

When wages are unpaid, you must notify your employer in writing that this is a significant breach of the employment agreement. The unpaid wages must be paid within 3–5 days, or you are entitled to terminate the employment relationship.

It is very important to follow the correct procedures, so contact PROSA in such cases. PROSA can assist in drafting such a demand letter. During this period, you are obligated to continue working for the company.

If you do not wish to terminate your employment due to delayed wage payments, it is still necessary to issue a written demand for the payment of wages. If the wages are still not paid, you can then decide whether to follow the procedure for terminating the employment relationship.

In any case, you should contact PROSA for further advice.

Termination of employment

If wages are not paid within the specified deadline, you may choose to terminate your employment. Termination of employment effectively means that the employment relationship ends immediately, and your employer owes you the unpaid wages, compensation equivalent to the wages during your notice period (employer's notice), holiday pay, bonuses, and similar amounts.

You should leave this part to PROSA, as an unjustified termination of employment can have serious financial consequences for you.

Once the employment relationship is terminated, you are obligated to mitigate your losses. This means you must try to secure other work. One way to document this is by registering as unemployed without benefits on www.jobnet.dk. You will be eligible to start new employment immediately.

How and when payments are collected

After terminating the employment relationship, your employer is given another deadline to pay the full compensation. If payment is not made, you can recover your money through a debt collection case, or it may be necessary to file a bankruptcy petition to declare the company bankrupt.

As a PROSA member, you can receive assistance in recovering the amount or filing a bankruptcy petition. If a bankruptcy order has already been issued, PROSA can also assist you with the application to the Wage Guarantee Fund (LG).

Please note that if a lawyer is required for the case, you must have been a PROSA member for at least three months before the issue arose or have joined when you started your job.

Reconstruction

When a company is undergoing reconstruction, it means the company is experiencing liquidity problems and cannot immediately pay its creditors or employees. Under certain conditions, your employer may borrow money to pay your wages from the Wage Guarantee Fund.

Reconstruction does not directly affect your employment. You must continue working for your employer, and your wages must be paid on time as usual.

You can demand that your employer provides a guarantee for your wages. However, this is not strictly necessary, as your wages are typically covered by the Wage Guarantee Fund during reconstruction.

PROSA can guide you on whether you should request a wage guarantee and assist you with this process. Contact PROSA if your employer is undergoing reconstruction.

Bankruptcy

When a company can no longer meet its obligations, a bankruptcy petition is often filed, and the bankruptcy court may declare the company bankrupt (bankruptcy order).

The court appoints a trustee, who must decide within 14 days whether the bankruptcy estate will make use of your labor. During this period, you are not required to work for the company and can consider yourself suspended. If the trustee decides to use your labor, they must at least provide a guarantee for your wages.

If the trustee does not wish to use your labor, you will be terminated and released from duties. You are then entitled to seek other work and should register as unemployed on www.jobnet.dk if no other job is available. You are required to actively seek and accept offers of work throughout your notice period.

You are still entitled to outstanding wages and wages during your notice period. However, you must apply for these through the Wage Guarantee Fund (LG). If your notice period is three months or less, you are entitled to receive wages for the notice period from LG, even if you secure new employment with new wages.

If your notice period is 4, 5, or 6 months, minimum compensation rules apply. This means LG is only obligated to pay wages for the first three months, while wages for the remainder of the notice period depend on whether you find new work. LG can offset your new wages. If the new wages are at least equivalent to your previous wages, you will not receive further payment from LG. Instead, you will receive wages and accrue vacation from your new employer. If the new wages are lower over the entire notice period, LG will pay the difference so that you are not worse off.

PROSA will assist you in completing the application form for LG and help you with the case. Be aware that the claim must be submitted to LG no later than four months after the company is declared bankrupt.

Loans from PROSA

After your employer goes bankrupt, you will not receive your wages, and you must apply for coverage through the Wage Guarantee Fund (LG). As a PROSA member, you can borrow an interest-free amount equivalent to the expected payout from LG.

The condition is that you complete a loan declaration available from PROSA and grant PROSA authorization to handle the case with LG and to offset the loan against the payout from LG.