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Legal Priority for Workers Payments

Legal Priority for Workers Payments: The New Law Alters Payments Priorities in Favor of Workers
In June of this year, Parliament issued Law No. 125 of 2010 (published in the Official Journal on June 19th, 2010 and made effective as of the following day) introducing a priority for workers payments by companies. The new Law states that payments due to workers - and resulting from the employment relationship - shall have a lien over all their employer's asset and must be paid prior to judicial, administrative debts as well as maintenance fees. This means in effect that workers payments take priority over all "sovereign" debts to government entities. Moreover, the new Law states that in case of bankruptcy or liquidation of the employing company or other entity or its permanent closure, then a time-frame for honoring those payments must be determined and supervised by the "competent administrative authority". Such authority will also have the legal powers to represent the workers in pursuing their rights to those payments in the determined schedule. Such "competent administrative authority" has not been named in the Law and will be determined by later decision of the Cabinet of Ministers.
Conclusion
This new Law provides an important safeguard to workers rights to their salaries and other payments (as well as the rights of their successors) resulting from the labor relationship. The fact that such payments are given priority over other Governmental debts is acceptable. But what may be a cause for concern are the provisions relating to bankruptcy, and that is for two reasons. The first is that it is difficult to envisage a full proof guarantee for workers payments under conditions of bankruptcy where, by definition, funds are not available to meet all obligations. And the second is that involving an administrative authority in pursuing those payments on behalf of employees alters the nature of the labor relationship as a private sector/private law relationship.
In June of this year, Parliament issued Law No. 125 of 2010 (published in the Official Journal on June 19th, 2010 and made effective as of the following day) introducing a priority for workers payments by companies. The new Law states that payments due to workers - and resulting from the employment relationship - shall have a lien over all their employer's asset and must be paid prior to judicial, administrative debts as well as maintenance fees. This means in effect that workers payments take priority over all "sovereign" debts to government entities. Moreover, the new Law states that in case of bankruptcy or liquidation of the employing company or other entity or its permanent closure, then a time-frame for honoring those payments must be determined and supervised by the "competent administrative authority". Such authority will also have the legal powers to represent the workers in pursuing their rights to those payments in the determined schedule. Such "competent administrative authority" has not been named in the Law and will be determined by later decision of the Cabinet of Ministers.
Conclusion
This new Law provides an important safeguard to workers rights to their salaries and other payments (as well as the rights of their successors) resulting from the labor relationship. The fact that such payments are given priority over other Governmental debts is acceptable. But what may be a cause for concern are the provisions relating to bankruptcy, and that is for two reasons. The first is that it is difficult to envisage a full proof guarantee for workers payments under conditions of bankruptcy where, by definition, funds are not available to meet all obligations. And the second is that involving an administrative authority in pursuing those payments on behalf of employees alters the nature of the labor relationship as a private sector/private law relationship.