Insolvency Payment in Cases of Immoral Wage Agreements – Criteria and Implications for Employees
The insolvency payment acts as a central safeguard for employees when their employer becomes insolvent. It secures outstanding wage claims for the last three months of employment before the insolvency. In practice, the question regularly arises as to how the insolvency payment is calculated if the agreed remuneration violates the principle of morality – for instance, because it is set particularly low.
Legal Framework of Insolvency Payments
The insolvency payment is a benefit from the Federal Employment Agency in accordance with §§ 165 ff. SGB III. It is granted if the employment relationship existed before the insolvency, termination threatened or had already occurred due to the insolvency, and the employer was unable to pay any or the full wages recently.
Immoral Wages and § 138 BGB
According to § 138, para. 1 BGB, legal transactions that violate good morals are void. A wage agreement is considered immoral if it is evidently below a wage level that, according to jurisprudence, is regarded as minimum remuneration. For this, jurisprudence typically sets a threshold of about two-thirds of the standard wage customary in the respective industry. If the agreed wage is below this threshold, it is regularly assumed that there is objective immorality. If this is also exploited subjectively, especially where there is an asymmetry of power between employer and employee, the conditions for immorality are regularly met.
Amount of Insolvency Payment for Immoral Employment Compensation
Relevant Comparison Wage
In cases of immoral wage agreements, the amount of the insolvency payment is not based on the actually agreed and paid wage, but on the amount that should have been paid as the customary local and industry wage at the time the employment contract was concluded. The benchmark is regularly the minimum wage or – if applicable – the collectively agreed remuneration. This aims to prevent social law from effectively legitimizing or even promoting immoral remuneration agreements.
Practical Consequences
If the Employment Agency concludes in the course of an insolvency payment procedure that an immoral wage agreement exists, the unduly low compensation is adjusted, so that insolvency payments are made based on the customary local or industry minimum wage. The Social Court of Mainz confirmed this in a decision from 2018 (Case No. S 15 AL 101/14). The judges emphasized that according to § 138 BGB, an immoral wage agreement is void and the wage, from a labor law perspective, must be raised to the usual level.
Importance for Affected Parties – Companies and Employees
The question of calculating insolvency payments for immoral wages is of significant importance for both sides of the employment relationship. Employees can ensure that, despite unfair wage practices, they receive at least a customary minimum safeguard locally. For companies, the case law serves as an important guideline and indication that unscrupulous wage agreements can entail not just employment contract law but also social insurance law consequences.
Impact on the Work and Economic Environment
Applying § 138 BGB to wage agreements in connection with insolvency payments contributes to effectively counteracting wage dumping. While social law otherwise provides no remedy for low wages, reverting to the objective standard of usual compensation offers affected employees the chance to be safeguarded in an economic crisis situation despite prior underpayment.
Limits and Open Issues in Practice
Finding the correct measure for the “usual wage” is regularly a challenge. Employment agencies and courts are obliged to ascertain the industry and local customary wage properly and on a case-by-case basis. The minimum wage, as well as collective wage agreements, can serve as points of reference. This leads to complex judgment questions in some cases, especially with atypical employment relationships or lacking meaningful reference values.
Conclusion
The decision of the Social Court in Mainz brings a clear distinction: Insolvency payments for immoral wage agreements are based not on the actual payment but on the industry-standard remuneration. Thus, employees are granted effective protection of their minimum pay claims even in insolvency situations. For companies, there arises the necessity to carefully consider the labor and social insurance law framework conditions when designing employment contracts.
Questions about the calculation of insolvency payments or uncertainties regarding the validity of wage agreements can be complex and demanding. In such cases, affected companies or individuals can turn to the experienced attorneys at MTR Legal to thoroughly review the existing issues.
