The employee now has the right to receive average monthly earnings after the company’s liquidation. What are the risks for the company, the liquidator, and the founders? Article by Ekaterina Belyaeva for Labor Disputes magazine

When a company is liquidated, the employer is obligated to pay the dismissed employees their average monthly earnings for the period during which they are looking for a new job. However, in practice, it is often the case that the right to such payment does not arise until after the completion of the liquidation process.

Several years ago, the Russian Constitutional Court highlighted this issue, and amendments were even introduced to the Russian Labor Code. Yet the core problem remains: by the time the right to payment arises, the legal entity will have ceased to exist. As a result, the employee—or, in some cases, the prosecutor’s office—will file a lawsuit to recover the unpaid amounts, and courts will typically rule in their favor.

This creates potential liabilities for the company, the liquidator, and the founders. To avoid such situations, it would be advisable to make provisions for possible payments already in the liquidation phase.

To read the full article, click here (in Russian).