ECJ ruling stops payment capping on insolvent firms

The European Court of Justice (ECJ) has ruled that state guarantee
organisations should be allowed to pay employees of an insolvent company more
than the minimum required to cover their basic needs.

In a case brought against Italy’s National Social Welfare Institution
(INPS), the court also said national laws should not order deductions from
guarantee fund handouts where a failed business paid its employees some money
while being wound up.

Specifically, the ECJ judges ruled that Directive 80/987/EEC does not allow
governments to limit payments to the sum needed to cover basic needs, nor are
they allowed to deduct payments made by the employer to its staff before the
company was wound up.

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