Bankruptcy Law

Pursuant to Article L. 625-9 of the Commercial Code, and without prejudice to the rules relating to the privilege of wage claims, claims arising from employment contracts or apprenticeship contracts are guaranteed, under the conditions set forth in Articles L. 3253-6 to L. 3253-21, by the Wage Guarantee Insurance (Assurance Garantie des Salaires (AGS)). This guarantee stems from the obligation imp …

Guarantee of payment of wage claims by the AGS

Pursuant to Article L. 625-9 of the Commercial Code, and without prejudice to the rules relating to the privilege of wage claims, claims arising from employment contracts or apprenticeship contracts are guaranteed, under the conditions set forth in Articles L. 3253-6 to L. 3253-21, by the Wage Guarantee Insurance (Assurance Garantie des Salaires (AGS)). This guarantee stems from the obligation imposed on all employers under private law to insure their employees, including those posted abroad or expatriated, against the risk of non-payment of sums due to them in execution of the employment contract, in the event of a safeguard procedure . Foreign employees within the meaning of Article L. 8252-1 benefit from these provisions for the sums due to them in application of the aforementioned texts . Thus, when a company is placed in insolvency procedure in a Member State and has an establishment in France, the claims of employees working there are guaranteed in the event of their employer's insolvency . 

1) Claims resulting from the termination of employment contracts

The insurance against the risk of non-payment also covers claims resulting from the termination of employment contracts during the observation period and in the month following the judgment adopting the safeguard plan . The termination must be initiated by the receiver or the legal representative, and not by the employee .

However, the AGS cannot be called upon to guarantee the payment of severance pay in the event of the opening of an insolvency procedure during the labor court proceedings, if this claim predates the opening judgment , or if the employment contract was terminated more than three years after the judgment establishing the plan . The AGS also does not guarantee the payment of sums owed by the employer pursuant to Article 700 of the Code of Civil Procedure, which do not result from the performance of the employment contract .

On the other hand, the insurance of employees against the risk of non-payment of sums due to them in execution of the employment contract covers the payment of the pecuniary compensation of the non-competition clause that results from the termination of the employment contract during the observation period . A contrario, the AGS cannot be called upon when the termination of the contract occurred before the opening judgment of the insolvency procedure .

In addition, in accordance with Article L. 3253-9 of the Labor Code, claims resulting from the dismissal of employees benefiting from a specific protection in case of dismissal are also covered when the receiver or the employer has manifested, during the observation period, or in the month following the judgment adopting the safeguard plan, its intention to terminate the employment contract. Thus, the indemnity allocated to a protected employee for dismissal without real and serious cause must be guaranteed when the receiver manifests his intention to terminate the employment contract within one month of the judgment adopting the plan by indicating in writing that a dismissal procedure will be initiated against him, regardless of the date of the actual termination .

2) Support measures resulting from a job preservation plan

The AGS covers the accompanying measures resulting from a job preservation plan determined by a majority collective agreement or by a document drawn up by the employer, in accordance with Articles L. 1233-24-1 to L. 1233-24-4 of the Labor Code, as long as it has been validated or approved under the conditions provided for in Article L. 1233-58, before or after the opening of the insolvency procedure . The guarantee extends to the sums provided for in the employment protection plans to promote the redeployment of employees, including outside the company or the group to which it belongs, as well as to compensation for the non-fulfillment of a redeployment commitment . When an employer does not respect the commitment made, prior to the judgment approving the plan, to present a minimum number of valid job offers in order to facilitate the external redeployment of employees, the AGS must guarantee the sums allocated as damages to compensate for the harm caused by the non-fulfillment of this obligation, even if this obligation can only be fulfilled after the dismissal . In addition, a parent company is obliged, in its capacity as co-employer, to compensate the dismissed employees of its subsidiary, when it does not prove that it is impossible to redeploy them within the group .

Pursuant to Article L. 3253-10 of the Labor Code, the AGS covers sums due under profit-sharing, employee profit-sharing or an employee fund when they take the form of a claim on the company. The guarantee extends to sums due in respect of employee profit-sharing only if they take the form of a claim against the company and not to sums which, pursuant to a profit-sharing agreement, are used to acquire shares in a mutual fund of which the employees have become co-owners . However, the insurance does not cover payments made by employees into a company savings plan by the mere fact of the allocation of these sums to the plan .

4) Claims resulting from a collective agreement

The insurance covers early retirement arrears due to an employee or former employee pursuant to a professional or interprofessional agreement, a collective agreement or a company agreement, in accordance with Article L. 3253-11 of the Labor Code. Wage claims resulting from a company agreement concluded after the judgment ordering the company's sale plan are covered by the AGS guarantee . However, a collective agreement that provides for a longer notice period and an increase of the amount of severance pay, with full knowledge of the harm that may be caused to the AGS due to the debtor company's inability to honor its commitments, constitutes fraud that renders the guarantee of the employees unenforceable against the AGS .

In addition, contributions to a supplementary pension plan provided for by a collective agreement or a company agreement are not claims of the company's employees but constitute a debt owed by the company to the institution managing the pension plan, the payment of which is not guaranteed by the AGS .

Pursuant to Article L. 3253-15 of the Labor Code, the AGS advances the sums included in a statement drawn up by the legal representative, even if they are contested by a third party. It also advances the sums corresponding to claims established by enforceable court decision, even if the guarantee periods have expired. The employee is not obliged to notify the wage guarantee institutions of the judgment rendered prior to the employer's insolvency procedure, which can be opposed against them ipso jure , even if they are not called upon to participate in the proceedings .

An employee who benefits from a final court decision ordering him to pay a wage claim arising from the termination of an employment contract prior to the opening of his employer's insolvency procedure is entitled to request that the AGS advances the funds corresponding to the sentences pronounced . The insurance must also guarantee the payment of sums due to the employee and entered on the supplementary statement drawn up following a decision of the labor court, even if this decision was rendered after the closure of the insolvency procedure .

If the claims cannot be paid in whole or in part from the funds available before the expiration of the time allowed to the legal representative to draw up the statements of claims, Article L. 3253-20 of the Labor Code allows him to request, upon presentation of the statements, the advance of the necessary funds from the AGS. Proof of the absence or insufficiency of funds for the payment of claims resulting from the employment contract, which makes it possible to trigger the guarantee, is not incumbent on the employee . Article L. 3253-21 specifies the time-limits within which the AGS must pay to the legal representative, and not to the employee , the sums appearing on the statements that remain unpaid.

Article L. 3253-17 of the Labor Code provides that the AGS guarantee is limited, for all sums and claims advanced combined, to six times the monthly ceiling used to calculate contributions to the unemployment insurance scheme . This amount is set at five times this ceiling when the employment contract from which the claim arises was concluded less than two years and at least six months before the date of the judgment opening the insolvency procedure, and at four times this ceiling if the contract from which the claim arises was concluded less than six months before the date of the judgment opening the insolvency procedure . The amount of the ceiling is assessed on the date on which the employee's claim is due and at the latest on the date of the judgment adopting the plan or pronouncing the court-supervised liquidation . The wage guarantee ceiling, which covers all wage claims, includes the advance payments made by the employer to the social security bodies, pursuant to Article L. 242-3 of the Social Security Code , but does not include the claims of the social security bodies, since these are not the employee's claims . Nevertheless, when the employee receives a salary significantly higher than that provided for by the applicable collective agreement, freely discussed with the employer, the maximum amount of the AGS guarantee may not exceed four times the monthly ceiling used to calculate contributions to the unemployment insurance scheme .

In accordance with Article L. 3253-16 of the Labor Code, the AGS is subrogated to the rights of employees for whom it has made advances for claims guaranteed by the employees' privilege  and claims advanced under Article L. 3253-8, 3°. The other sums advanced in the context of these procedures are reimbursed to them under the conditions provided for in Book VI of the Commercial Code for the payment of employee claims arising prior to the opening judgment of the procedure. The AGS then benefits from the privileges attached to the procedure.

Cass. soc., 2 October 2001, LawLex202100003811JBJ (RJ) ; 8 February 2012, cited above.

Cass. soc., 8 February 2012, LawLex202100003809JBJ (RJ).

Cass. soc., 28 September 2011, cited above.

Cass. com., 28 November 2007, LawLex202100003765JBJ (LJ).

Cass. soc., 30 September 2009, LawLex202100003756JBJ (RJ).

Cass. soc., 29 September 2009, LawLex202100003757JBJ (RJ).

Cass. soc., 28 March 2000, LawLex202100003806JBJ (LJ).

Cass. soc., 6 March 2019, LawLex202100003818JBJ (LJ).

Cass. soc., 5 June 2012, LawLex202100003540JBJ (LJ) ; 27 November 2013, LawLex202100003538JBJ (LJ).

Cass. soc., 17 October 2018, LawLex202100003761JBJ (LJ).

Cass. soc., 16 March 2022, LawLex202200003968JBJ (LJ).

Cass. soc., 21 October 1998, LawLex202100003744JBJ (RJ).

Cass. soc., 18 March 2008, LawLex202100003558JBJ (RJ) ; 16 December 2008, LawLex202100003544JBJ (LJ).

C. trav., art. D. 3253-5, al. 3. See in particular, Cass. soc., 31 March 2015, LawLex202100003746JBJ (LJ) ; 7 March 2018, LawLex202100003747JBJ (LJ).

Cass. soc., 8 March 2017, LawLex202100003749JBJ (LJ) ; 20 March 2019, LawLex202100003768JBJ (LJ).

Cass. soc., 2 July 2014, LawLex202100003559JBJ (LJ).

Cass. soc., 17 December 1991, cited above.

C. trav., art. L. 3253-2, L. 3253-4 et L. 7313-8.

Cass. soc., 20 December 2017, LawLex202100003807JBJ (LJ).

Cass. soc., 8 November 2011, LawLex202200003974JBJ (S).

Cass. soc., 9 November 2005, LawLex202100003554JBJ (RJ).

Cass. soc., 2 March 1999, LawLex202100003764JBJ (LJ) ; 28 September 2011, cited above.

Cass. soc., 29 January 2003, LawLex202100003810JBJ (RJ).

Cass. soc., 19 May 2016, LawLex202200003985JBJ (S). See already, Cass. soc., 6 May 1997, LawLex202100003760JBJ (RJ).

Bankruptcy Law

241. Guarantee of payment of wage claims by the AGS

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241. Guarantee of payment of wage claims by the AGS

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Les notions juridiques connexes

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