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Insolvency, redundancy and employee rights

What happens if the company you work for makes redundancies after going into administration but fails to follow the requirement to consult with employees? The case of Citi Link which crashed into administration in December 2014 is a good example.

You will recall that the directors of City Link had been prosecuted and acquitted of the criminal offence of failing to give the Government advance notice of mass redundancies (see https://www.moonbeever.com/blog-rss/1033-city-link-directors-acquitted). However that was by no means the end of the story.

In Stokes v City Link an employment tribunal considered claims brought on behalf of ex-employees of City Link, which went into administration in December 2014 with the loss of nearly 3,000 jobs.

The Trade Union and Labour Relations (Consolidation Act) 1992 (TULRCA) requires an employer to inform and consult with representatives of the employees affected where it is proposing to make 20 or more people redundant at one establishment within a 90-day period. If an employer fails to comply with these requirements, an employment tribunal can order the company to pay up to 90 days’ gross pay per employee.

When it became apparent that administration was the only option, no consultation was carried out. Employees found out via the national press that they would be dismissed. They brought a claim over the company’s failure.

The employer argued that it was hoping to secure additional funding and as it only became apparent on 22 December 2014 that this would not be forthcoming, there was no time to consult. The tribunal was unimpressed.

The tribunal found that the employer knew back in November 2014 that it would potentially have to make large-scale redundancies or face insolvency. Consultation should have begun then. It awarded the maximum ‘protective award’. If there are no funds to pay the employees, then the liability for making good on the awards falls on the state.

Sarah Rushton (This email address is being protected from spambots. You need JavaScript enabled to view it.)
Partner

This is intended for general information only and should not be considered as giving advice in relation to any individual case nor be taken as applying to any particular case. No liability is accepted for any such use of the information contained.