Peter Burke (Longford-Westmeath, Fine Gael)

I move: "That the Bill be now read a Second Time."

I welcome the opportunity to discuss the Protection of Employees (Employers’ Insolvency) (Amendment) Bill 2025. The Bill makes changes to the insolvency payments scheme. This scheme fulfils a vital function. It protects workers in the event of their employer's insolvency. It covers certain pay and pension-related entitlements that an employee may be owed by their insolvent employer. Payments under the scheme are made from the Social Insurance Fund. The scheme is administered by the Department of Social Protection on my behalf.

Before getting into the specifics of the Bill, it may be useful for me to outline the background to the insolvency payments scheme. The scheme has operated since 1984. It is governed by the Protection of Employees (Employers' Insolvency) Act 1984, as amended. This protection stems from European law, currently Directive 2008/94/EC. When an employer becomes insolvent, a liquidator or similar relevant officer is usually appointed to wind up the company. As part of their role, the liquidator will check the company's books and compile a list of what each employee is owed. The liquidator then applies to the Department of Social Protection on behalf of the employees for payment under the insolvency payments scheme. This scheme covers a range of entitlements. These include arrears of wages, holiday pay and sick pay, minimum notice, unpaid employment rights awards and certain unpaid pension contributions. Certain limits are applied to payments. A salary ceiling of €600 per week applies to most payments. Arrears of wages, sick pay and holiday pay claims are further capped at a maximum eight weeks each. When a claim is accepted, payment is made from the Social Insurance Fund to the liquidator. The liquidator in turn pays out to the employees.

Access to the insolvency payments scheme is contingent on the employer being insolvent. Insolvency is currently defined in the Act as where the employer is in liquidation, receivership, bankruptcy, has died and their estate is insolvent, or is insolvent under the laws of another EU member state or the UK. However, there are gaps in the legislation that the Bill intends to address. In rare cases, a business may cease trading but fail to fully wind up. This may be because the directors have insufficient assets to fund the liquidation, or for other reasons. This is sometimes referred to colloquially as informal insolvency. When this happens, former employees of the business who have moneys owed to them do not have a legal mechanism to claim these amounts under the insolvency payments scheme. The Supreme Court found in the Glegola case that this does not meet the directive’s requirements. The Supreme Court held that the State has, therefore, failed to transpose Article 2(1)(b) of the directive.

To address this gap, the Bill provides for a new "deemed insolvent" application. Using this new application, an employee can apply to have their employer deemed insolvent for the purpose of accessing the insolvency payments scheme. This new process will address the Act's shortcomings, as identified by the Supreme Court. To avoid any unintended consequences, the Bill provides that a finding of deemed insolvency under this process will not have any implication for other definitions of insolvency, such as under company law or bankruptcy law. The Bill also provides for a process for historical deemed insolvency, and I will give more detail on this process in discussing the details of the Bill. The Bill proposes some additional technical changes to improve the scheme's operation.

I will outline the four main policy objectives of the Bill. The first is to ensure Directive 2008/94/EC is fully transposed into Irish law. This will ensure that employees of employers who do not formally wind up their business will benefit from the directive's protections. The second is to ensure the scheme's operation is in alignment with broader Government policy on personal insolvency. The third is to further improve the operation and administration of the scheme by reducing policy uncertainty in how the salary ceiling applies to certain payments. The fourth is that we want to ensure that Circuit Court awards for gender discrimination are brought back within the ambit of the scheme.

Before turning to the detail of the Bill, I want to give a brief explanation of how the new process for deemed insolvency will work. In summary, under this new process, the employee will first have to serve formal notice on their employer and give them a reasonable period to pay any moneys due. If the employer fails to pay, the employee can apply to the scheme to have them deemed insolvent. When an application for deemed insolvency is received, the employer will be notified and given a chance to participate in the process.

The test we will use to deem an employer insolvent is whether they have ceased trading. This is a more favourable test than the directive requires. Under this test, officials will consider the application, the employer's response and, most importantly, Revenue and Companies Registration Office data on the employer. If the evidence shows an employer has ceased trading, the employer will be deemed insolvent for the purpose of that application only. The employee will then be able to seek their outstanding moneys from the insolvency payments scheme. If the evidence shows an employer has not ceased trading, then the employer is not deemed insolvent. In such cases, an employee still has rights to pursue the employer through the Workplace Relations Commission or the courts.

I will now outline the main provisions of the Bill. The Bill consists of 13 sections, divided into three Parts. An explanatory memorandum has been published and provides a summary of the provisions.

Part 1 deals with preliminary and general matters. Sections 1 and 2 set out the Short Title of the Bill, commencement provisions and necessary definitions. Section 3 provides for a transitional provision for claims already in progress at the time of the Bill’s commencement.

Part 2 amends the Protection of Employees (Employers' Insolvency) Act 1984, which is defined as the principal Act. Section 4 inserts new definitions and updates other standard definitions in the principal Act. It also amends the principal Act’s definition of insolvency in two ways. It now includes the new process for deemed insolvency and, for claims arising before the Bill comes into effect, a process for historical deemed insolvency. It also includes an employer who enters into an insolvency arrangement within the meaning of the Personal Insolvency Act 2012. These insolvency arrangements were introduced as an alternative to bankruptcy.

Section 5 updates how the date of insolvency is defined in the principal Act for these new types of insolvency.

Section 6 inserts eight new sections, sections 4A to 4H, into the 1984 Act. Section 4A allows an employee to serve written notice on their employer seeking payment of moneys owed. This starts the process for deemed insolvency. Section 4B allows an employee to apply to the Minister to have their employer deemed insolvent if they have not received their money after eight weeks. It also provides for the automatic stop of the process if the employer is already insolvent.

Section 4C requires the Minister to notify the employer where an application to deem them insolvent has been made. The employer has four weeks to respond if they want to engage with the process. Section 4D permits an employer to respond to the application to deem them insolvent and to request further information from the Minister on the application. Section 4E sets out the process for the Minister to follow when deeming an employer insolvent, or not, as the case may be. It also provides that a finding of deemed insolvency does not mean the employer is insolvent for any other purpose.

Section 4F deals with a historical deemed insolvency process. This is a particularly important section. It ensures employees of employers who ceased trading without formally winding up before the Bill's commencement are not disadvantaged by the previously incomplete transposition of the directive.

This covers historical cases where employees were owed money but their employers failed to formally wind up their businesses. It relates to claims spanning from the original directive transposition date, October 1983, to the commencement of this legislation. The historical deemed insolvent process will be open for two years following the legislation's commencement. A further extension of two years is possible in exceptional circumstances outside the employee’s control. My Department will run a comprehensive communications campaign to ensure affected employees are aware of this process.

The new section 4G sets out how notices under this Bill are to be served on employers.

The new section 4H sets out how personal data is to be treated.

Section 7 makes changes to section 6 of the 1984 Act, relating to applications for payment of outstanding pay-related entitlements. These are generally of a technical nature and reflect the specific circumstances of the new deemed insolvency and personal insolvency arrangements. This section will also update how the salary limit is applied to all payments from the scheme. This change gives a statutory basis for the long-standing practice governing scheme payments, which was found to be ultra viresin the Court of Appeal judgment in the Brady case. This change will ensure that all applicants are treated consistently. Minor differences in the wording of adjudications for employees receiving similar awards in comparable situations will not give rise to significant differences in their entitlements under the scheme.

Section 8 makes some technical changes to section 7 of the 1984 Act relating to applications for payment of outstanding pension contributions.

Section 9 amends section 8 of the 1984 Act to allow the Minister to request certain information from an employee applicant to assist in deciding an application.

Section 10 amends section 9 of the 1984 Act by specifying that certain decisions are not appealable to the Workplace Relations Commission, WRC.

Section 11 is a technical amendment to section 10 of the 1984 Act to reflect other changes made in the Bill.

Section 12 amends section 11 of the 1984 Act by allowing the Minister to vary, by order, the number of weeks an employer has to pay an employee the monies owed, before the deemed insolvent process can commence.

Part 3 contains one section, section 13, which amends the Employment Equality Act 1998. This change ensures awards of the Circuit Court for gender discrimination are covered by the scheme. This corrects a 2015 amendment that inadvertently omitted such awards from the scheme’s scope.

The Bill is quite complex and technical. Deputies will appreciate it will deliver an important change to how the State protects employees. I draw Deputies' attention to a number of important points. I welcome the support of the joint committee in the previous Dáil for the Bill during the pre-legislative scrutiny process. It is rare for a legislative proposal to receive a statement of support without any suggestions from the committee during the pre-legislative scrutiny process. I thank the committee for its consideration.

I also flag my intention to bring forward amendments on Committee Stage. These will clarify the extent of the State’s liability to pay certain outstanding pension contributions, where both the employer and defined benefit pension scheme are insolvent. They will also clarify the protection of outstanding contributions to the new auto-enrolment retirement savings scheme when an employer is insolvent.

Part 2 of the Bill will complete the proper transposition of the directive. This Part reflects the recommendations of an interdepartmental working group which examined the issue in 2023. The proposals set out in the Bill represent a careful balance. We have sought to make the process as straightforward as possible for employees, while also ensuring employers who may still be trading are able to participate in the process and taxpayers’ money is protected. While the legislative proposals are quite complex, our objective is to ensure that the process itself will not be.

The new deemed insolvent process will be employee led. This is because no liquidator or similar officer will be appointed to wind-up the employer’s business. My officials have worked closely with their counterparts in the Department of Social Protection to ensure the customer journey is as straightforward as possible for employees who need to avail of this new deemed insolvent process. This includes straightforward application forms, using plain English, and clear, step-by-step assistance. The Bill also provides that a representative such as a trade union or trusted family member can make an application on an employee’s behalf.

If the Bill proceeds to enactment, the Government will undertake a communications campaign to ensure people who may be entitled to claim under the new deemed insolvent process are aware of their entitlements and how to access them. In particular, we will focus on those with a historical claim to ensure employees of an informally insolvent employer are not disadvantaged.

This Bill will further enhance the protection of employees when their employers become, or are deemed, insolvent. Most importantly, it will extend access to the insolvency payments scheme to include employees of employers who cease trading without formally winding up their businesses or of sole-trader employers who enter into personal insolvency arrangements. It will deliver a time-limited process for historical deemed insolvent applicants to claim their entitlements. It will ensure that the salary limit applies to all payments from the insolvency payments scheme in the same way, ensuring certainty of outcome and consistency of treatment for all applicants.

I look forward to debating the merits of this important Bill and working with Deputies and Senators across both Houses to ensure its swift enactment. I commend this Bill to the House.

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