Lawyers
Eligibility of employees of a company in liquidation to claim wages from National Insurance
There are many cases where an employer finds itself in a state of insolvency and goes into liquidation or bankruptcy proceedings. In this framework, more than once, the company’s employees are left without receiving their wages. In this situation, they will be able to apply to the National Insurance Institute, which will step into the shoes of the employer and pay them their wages for a period of up to 12 months and subject to the maximum allowed by the law.
By Igal Mor, Adv. & Notary
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What does the payment include for employees whose rights have been violated?
Employees whose rights have been violated due to the liquidation of the company that employs them, or the bankruptcy of a single employer, are entitled to apply to the National Insurance Institute. It will pay them a benefit that includes compensation for unpaid wages, severance pay and pension provisions to the extent that these have not been made. We emphasize that the Social Security institute will not necessarily pay the entire amount that the company owes the employee, since the benefit is paid for a period of up to 12 months at most and is limited to the maximum amount set in the regulations. The wage components that are taken into account for the purpose of paying wages include not only the employee’s base wage, but also overtime pay, commissions and travel expenses. The payment will also include vacation redemption and convalescence pay not paid to the employee.
Payment of pension and severance pay
As stated, in addition to wages, the employee is entitled to receive from the National Insurance Institute, as part of the benefit, also a pension payment and severance pay if it is not paid to him. in Israel there is an obligation for pension provisions since 2008, which requires every employer to make deposits to an employee in a pension fund, which includes a pension component and a compensation component.
As for the pension component, if no deposits were made at all, or there is a shortage, Social Security will supplement up to the ceiling amount. As for the compensation component, an employee for whom deposits for severance pay have been deposited, the Social Security will fill the gap for full severance pay (since the law requires a provision of only 6%). When the employee is not insured at all by the company, that is, no provisions for compensation have been made to him, the National Insurance Institute will pay him the full severance pay.
Conditions for receiving a benefit
In order to be eligible for a Social Security benefit and receive one or more of the above payments, the employee must meet three conditions. The first condition is that it is only an employee. A person who is self-employed or a controlling shareholder who has no employee-employer relationship between him and the company is not entitled to this benefit. The second condition is that the court has issued a liquidation order to the company which employed the employee or in the case of a sole employer, it has been declared bankrupt. The third condition is that the court has appointed a trustee or liquidator. It should be emphasized that these are cumulative conditions and non-compliance with one of them will not allow the employee to receive the benefit.
To whom is the lawsuit filed?
Every right that a person is entitled to from the National Insurance Institute requires the filing of a claim, and as a rule, the claim will be submitted to the National Insurance branch to which the insured belongs. However, in the case of a liquidation company or a single employer in bankruptcy, the employee’s claim will be submitted to a trustee or liquidator appointed by the court, which centralizes all the creditors’ claims of the company. Only after it has examined the claim and approved, will it be transferred to Social Security and it will pay the benefit to the employee if it deems it appropriate to accept it. That is, the National Insurance Institute has the authority to approve the claim in full or in part, or to dismiss it. We emphasize that the wage claim will always be filed in the above manner, but with regard to the claim for severance pay and pension provisions, it must be examined whether the company retired to the employee during the employment period. If so, the claim will be submitted to the insurance company and not to the Social Security. It should be noted that in most cases, upon publication of the liquidation order the insurance company itself, which manages the pension fund, usually files a general claim to the trustee or liquidator on behalf of all the company’s employees, and therefore the employee will not be required to file an independent claim.
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