Like lawyers specialising in labour law and bankruptcy in Martínez Sanz Lawyers, We know that one of the main concerns of workers affected by an insolvency procedure is when they will receive their wages or severance pay. In this article, we explain with clarity and legal rigour when and in what form the worker can be paid, either through the company, the insolvency proceedings or FOGASA.

At what point does the worker get paid within the competition?

When a company is declared in insolvency proceedings (as regulated by the Texto Refundido de la Ley Concursal - TRLC (Consolidated Text of the Insolvency Act)), judicial proceedings are initiated to manage their insolvency. In this process, there is a rigid legal order in the way of paying any type of credit, with a radical distinction between insolvency credits (those generated before the insolvency) and credits against the mass (in principle, those arising after the declaration of insolvency). Well then, labour claims - wages and severance pay - have special protection, but this does not mean that collection is automatic or immediate.

✅ How do labour credits rank?

The unpaid wages y severance payments are considered preferential bankruptcy claims in the amount that does not exceed the legal limit (art. 280 TRLC). This means that, once the company's available assets have been determined, workers are among the first to be paid.

However, there are certain labour credits that are against the mass (thus, those corresponding to the last thirty days of actual work performed prior to the insolvency proceedings in an amount not exceeding twice the minimum wage), which must be paid by the insolvency administration immediately (art. 242 and 245.1 TRLC).  

⏰ When is it actually charged?

There are three possible moments:

  1. If the company is still active and liquid, The employer may pay the wages as they fall due, even during the insolvency proceedings, as well as the wages for the last month's salary before the insolvency proceedings. Moreover, these claims are preferential, as they must be paid immediately.
  2. If the company cannot pay, The wages and compensation are incorporated into the insolvency estate and the employee must wait for the insolvency proceedings to start:
    • The agreement phase (if an agreement is reached with creditors), or
    • The liquidation phase (when assets are sold to pay debts).
  3. If the company is insolvent or there are insufficient assets, the FOGASA (Wage Guarantee Fund) may take over part of the amounts owed and will be subrogated to the employee's position in the insolvency proceedings. This will require that the amounts are reflected in a certificate from the bankruptcy administration (e.g. wages owed) or in a court decision (e.g. a judgement of unfair dismissal by a labour court).

The role of FOGASA: support in the event of insolvency

When liquidity is lacking, workers can turn to the FOGASA, which covers:

  • The severance payments up to a maximum of one annuity and on the basis of 30 days per year worked.
  • To 120 days of unpaid wages, The limit is twice the minimum daily wage.

How long does FOGASA take to pay?

  • The processing of FOGASA claims may take between 3 and 6 months, depending on the administrative burden and the fulfilment of documentary requirements.

At Martínez Sanz Lawyers we take care of managing the claim for dismissal before FOGASA, ensuring that the worker obtains as quickly as possible what he/she is legally entitled to.

Legal advice for workers affected by insolvency proceedings

  • Do not sign documents without adviceSome dismissals can be qualified as null and void or unfair.
  • Collect all employment documentationcontracts, pay slips, employer's communications.
  • Claiming in timeThe time limit for contesting dismissals is 20 working days since notification.

In many cases, a good labour defence in insolvency proceedings allows for maximising compensation and ensure collection through judicial channels or through FOGASA.

Conclusion: Yes, the worker is paid, he is not unprotected, but he needs to be well advised.

In an arrangement with creditors, the employee is not left unprotected, but the time of collection will depend on the economic state of the company and whether or not FOGASA intervenes.

From Martínez Sanz Lawyers, We accompany you throughout the entire process: from the communication of the dismissal to the legal defence and the claim for wages or compensation. Our team is prepared to ensure that your employment rights are not lost in the midst of a complex insolvency process.

Do you have doubts about your situation or do you need to claim unpaid amounts for dismissal or wages?

👉 Contact our lawyers with expertise in labour and insolvency law.