For employees, the news that the company "has entered insolvency" sounds like a catastrophe. The legal reality is more nuanced: insolvency does not terminate employment contracts, and employees are among the best-protected creditors in the entire procedure. Here is what an employee — and a responsible employer — should know.

Reorganization: the business continues, employees stay

If the company enters judicial reorganization, the very purpose of the procedure is to keep the business running. Employment contracts remain in force, current wages are paid on time — they are procedure expenses with payment priority. The reorganization plan may provide for staff restructuring, but it follows the ordinary rules of the Labor Code (collective dismissal, notice periods, compensation), under the supervision of the judicial administrator.

Bankruptcy: the gradual cessation of activity

In bankruptcy, the judicial liquidator may terminate employment contracts as the activity winds down. Importantly: even in this scenario, dismissals must observe wage rights, and the amounts owed to employees do not disappear — they are entered in the table of claims with a high priority rank.

Unpaid wages: what priority do they have?

Wage claims hold a privileged position in the order of distribution set by Romanian Law 85/2014: they are paid before budgetary claims and unsecured suppliers. Moreover, employees do not need to file a proof of claim — wage claims are entered in the table ex officio, based on the employer's records.

The Wage Guarantee Fund

For situations where the insolvent company has no liquidity, there is the Guarantee Fund (Romanian Law 200/2006): it covers outstanding wages, compensation and allowances due, up to 3 national average gross salaries per employee, for a period of up to 3 months. The application is filed through the liquidator/judicial administrator or directly by employees with the employment agency.

Technical unemployment and unemployment benefits

Employees dismissed as a result of insolvency have access to unemployment benefits under the ordinary conditions. The period worked at the insolvent company counts in full — the employer's insolvency does not affect the employee's contribution record.

What should an employee do when the company enters insolvency?

  • Don't resign impulsively — resignation can mean losing certain rights (compensation, unemployment benefits);
  • Check your wage situation — request a statement of arrears and confirm you appear correctly in the employer's records;
  • Follow the judicial administrator's communications — they become the key contact for wage rights;
  • Document everything — contracts, pay slips, correspondence; in a dispute, documents are the proof.

For employers: transparency reduces panic

The costliest mistake a struggling company's manager can make is silence. A mass departure of key people can turn a reorganizable company into a doomed one. Honest communication with the team — what the procedure means, what changes, what doesn't — is part of the recovery strategy, not an HR detail.

Running a company in difficulty and worried about your team? Judicial reorganization exists precisely to save the business and the jobs. Talk to us before the options close.

This article is for information purposes and does not constitute legal advice.