The insolvency of a company may prove traumatic for employees, especially those who have invested years of effort and skill in the enterprise. A range of outcomes for employees may be triggered by insolvency, and the law, in some respects, seeks to minimise the negative consequences of insolvency for employees. Insolvency law, however, has other interests to look to, notably those of creditors and possibly those of shareholders and the state. Issues of fairness come to the fore, as do considerations of rescue and the design of rules that allow efficient transfers of enterprises.

This chapter begins by outlining how the law treats employees in an insolvency. It then moves to a now familiar set of issues by asking four questions. Do insolvency laws relating to employees lead to efficient rescue processes and corporate operations? Do these laws make best use of employee expertise? Are employees given an appropriate voice within the schemes of accountability that operate in insolvency? Does the law allocate rights to employees that are fair? A further, more general issue is then discussed: whether insolvency law's conception of the employee evidences a coherent and appropriate philosophy.

A preliminary issue, however, has to be dealt with: the scope of the term ‘employee’ for the purpose of insolvency protections. A starting point here is that, in order to claim priority as an employee, a person must be employed under a contract of service with the company rather than, say, operate as an independent contractor.