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Nightmare in Berlin: What happens when the startup you work for goes broke? Written by Christine G. Coester on 20. April 2017

Thiago Lunardi, a 35-year-old Brazilian software engineer, moved to Berlin with his wife and 5-year-old daughter. He was headhunted from London by Auctionata, a Berlin tech startup in the Art and Luxury auction market.
Then Auctionata filed for bankruptcy in March 2017.
When Lunardi learned Auctionata filed for bankruptcy he started looking for another position. “The company, at that time, wasn’t even buying toilet paper for us,” he tells the Heureka.
Lunardi came to Germany with an EU Blue Card, a “residence permit for non-EU nationals who have an academic or equivalent qualification and a defined level of minimum salary.”
During the bankruptcy period, Lunardi says he received zero information from the board or HR: “They started to treat us like garbage.”
Anne Stahl, another former Auctionata employee, wrote about the experience in her blog:

Many of my colleagues, were bound by a 3-month notice period and were consequently not able to ‘hop on’ a new career opportunity when things start looking bad.

Yet, they can be (and were) ‘set free’ by their employer during insolvency proceedings, without so much as a day’s notice! And here is the biggest problem: if they haven’t yet paid into the German unemployment insurance for at least 12 months, they are now faced with applying for social welfare (Hartz 4) – which is by no means guaranteed and which doesn’t come close to their earning potential.

What is a startup required to tell and do for their employees?

According to Andelka Novokmet, a Berlin-based lawyer, an employee with an open-ended full-time contract “should receive a period of notice of at least three months” in order to find a new position, but bankruptcy does not necessarily result in the termination of employment.
Employees with fixed-term contracts can be fired as early as the end of the month once insolvency proceedings begin, Novokmet explains. This is regardless of whether there was a period of notice agreement arranged between the startup and employee.
An “employer is not obligated to inform the employees of a crisis or the position of an insolvency application in advance,” Novokmet explains. But an employee is entitled to an employment reference.
Luckily, Lunardi quickly found a new position, but he had to figure everything out on his own regarding residency and his visa.

The startup is broke: What happens to your visa?

Obviously, if you have permanent residency in the EU, a company’s bankruptcy will not affect your right of residence, Novokmet explains.
But if you have an EU blue card, like Lunardi, or a temporary residence permit, it is more complicated. Both of these residence titles or visas are “under threat of expiration if the employment relationship is terminated and new employment is not found,” Novokmet says. Although the employee still keeps his or her valid residence permit, the foreigners’ registration office (or the Ausländerbehörde) can change the duration of the visa and place a time limit for the visa-holder to find a new position.
“The discretion of the foreigners’ registration office plays an important role,” she explains.
But a startup is obligated to let immigration authorities know when a position was terminated, so there is no hiding this. Making an appointment to speak with someone at the foreigners’ registration office is the best option in this case.

What precautions can an international startup employee take?

When applying for a position, an employee can negotiate for a compensation payment, which would be given to the employee if the startup terminates the employment contract prematurely, Novokmet explains.
“Whether and to what extent one is able to reach such an agreement is of course a matter of negotiation and will vary from case to case,” she says.

Photo credit: GorillaSushi via VisualHunt / CC BY-SA