Thursday 13 May 2021

European court tears up pre-pack bankruptcy deal, backs workers

The European Court of Justice on Thursday ruled in favour of four daycare workers sacked in a pre-packed bankruptcy deal.

The case was brought by the FNV trade union representing the four who lost their jobs when daycare group Estro went bust in 2014 and restarted immediately as Smallsteps. In total, 1,000 of the 3,800 members of staff lost their jobs.

A pre-pack deal allows companies to restructure and prepare a restart as part of the bankruptcy process but has been condemned for leaving staff and suppliers in the lurch. Unions say it is often used by companies as a way to force through a reorganisation.

The court, which had been asked to rule on the situation by a lower Dutch court, said that workers involved in a pre-pack bankruptcy should keep the same rights as in a normal takeover. In the pre-pack set-up they often end up with worse pay and conditions and only a small financial settlement if made redundant.

Claim

The court ruling means all Estro staff are officially employed by Smallsteps because ‘European law takes precedence’ labour law professor Evert Verhulp told news agency ANP.

‘However, to claim back pay, they should have made it clear that they wanted to continue in their jobs. That does apply to the four who went to court. The others will be able to apply for a golden handshake but it is unclear if Smallsteps will be able to pay.’

Other companies which have used the pre-pack bankruptcy construction include McGregor, prawn processor Heiploeg, travel agency Neckermann, lingerie retailer Marlies Dekker and the Free Record Shop.

‘This ruling means that the pre-pack is no longer an attractive way to reorganise and get rid of staff and secondary benefits cheaply,’ FNV deputy chairman Kitty Jong said in a statement. ‘Up to today, workers had no rights if a company went bust.’

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