“Not” timely payment of holiday pay due to the insolvency of the employer

The employer is obliged to pay the employee who has the right to annual leave no later than July 1 of the current calendar year the annual leave allowance in the amount of the minimum wage. The deadline for the payment of holiday pay can be extended until November 1 of the same calendar year, but only if the collective agreement at the activity level allows this and only due to the actual insolvency of the employer.

The Labor Relations Act (hereinafter: ZDR-1) in paragraph 3 of Article 131 stipulates that in case of insolvency of the employer, the collective agreement at the activity level may set a later deadline for the payment of holiday pay, but no later than November 1 of the current calendar year.

Slovenian legislation does not explicitly regulate what insolvency is, which is why the courts often resort to interpreting more permanent insolvency within the context of the debtor’s insolvency. The provision of Paragraph 2 of Article 14 of the Act on Financial Operations, Insolvency Procedures and Compulsory Termination (hereinafter: ZFPPIPP) stipulates that a debtor who is a legal person, entrepreneur or private individual is permanently insolvent:

  • if he is late for more than two months in fulfilling one or more obligations in a total amount that exceeds 20 percent of the amount of his obligations, shown in the annual report for the last financial year before the due date of these obligations;
  • if the funds in his accounts are not sufficient for the execution of the enforcement order or the payment of the enforcement order and such a situation lasts continuously for the last 60 days or with interruptions of more than 60 days in the period of the last 90 days, and such a situation lasts on the day before the filing of the proposal to start insolvency proceedings , or
  • if he does not have at least one bank account opened with payment service providers in the Republic of Slovenia and if, after 60 days have passed since the decision on enforcement, he has not settled his obligation arising from the decision on enforcement

To put it simply, Slovenian jurisprudence most often characterizes insolvency as a financial situation when the employer does not have enough funds to fulfill current or due obligations on time.

In addition, Slovenian courts have repeatedly taken the position that the employer must not only claim insolvency, but must also fully prove it. Thus, the Higher Labor and Social Court with the judgment with reference no. no. Pdp 683/2013 of 03.07.2013 decided that:

“The defendant did not prove insolvency as a condition for postponing the payment of holiday pay when it is due. In accordance with Article 212 of the ZPP, the defendant should state relevant facts and propose evidence of the existence of insolvency. In this regard, not only the witness’s statement that the defendant has fallen into liquidity problems is sufficient, but the defendant should prove the existence of insolvency for the payment of recourse with appropriate documentary evidence, in particular this applies to financial indicators regarding the excess of liabilities over the company’s assets or prescribed financial statements, which must be kept by all economic entities.”

If the employer does not prove that he was insolvent in the current year, or that he would be late in fulfilling his obligations to such an extent that the postponement of the holiday pay was justified, he must charge the employee holiday holiday pay, together with the statutory default interest on the unpaid holiday pay and otherwise, from July 2 of the year to which the individual holiday applies, until payment.

The involvement of legal experts in the procedures related to the non-payment or delayed payment of holiday pay is crucial, as it is first necessary to correctly assess the actual circumstances of the employer’s business, and then to record and record them accordingly, all with the aim of minimizing losses due to the potential consequences of inspections and legal proceedings . Likewise, in the case of obvious violations of the worker’s rights due to the non-payment of holiday pay and other benefits from the employment relationship, and due to the complexity of court proceedings, the help of legal experts is welcome or, in most cases, necessary.