Employment law there s more to it than TUPE Tabytha Cunningham Associate Solicitor T: 023 8057 4343 E: tabythacunningham@coffinmew.co.uk
The inherent problem Inherent clash between employment and insolvency law Employment law Main purpose Protect employees Insolvency law Mainpurpose Promote rescue culture
Adoption of contracts 14 day window Designed to give administrators time to acquaint themselves withthe the business before reaching a decision Nothing which the administrator does or omits to do within 14 days of their appointment will cause contracts of employment to be taken as "adopted"
Adoption of contracts Nothing which the administrator does or omits to do within 14 days of their appointment will cause contracts of employment to be taken as "adopted But potential argument that clear communication that administrators will adopt contracts after the 14 days could be binding Practically: Make it clear that you re utilising the 14 day window Don t communicate any decision to adopt after the 14 days unless you re willing to be bound dby it
Adoption of contracts After 14 days position flips If employees are still there and still being paid = contracts adopted No need to tell employee that their contract has been adopted If you want to end the contract make sure this is clearly communicated within the 14 days
Adoption of contracts Adoption is an all or nothing matter Not possible for an administrator or receiver to avoid 'adoption', or alter its consequences by informing the employees that they are not adopting their contracts t Potential ti argument if contracts t terminated t and entirely new contracts re negotiated (and not a sham) but high risk of claim
Adoption of contracts Administration: super priority of qualifying liabilities Qualifying i liabilities" paid idin priority: it to outstanding claims for the administrator's fees and expenses, if unpaid when they leave office; and ahead of the distribution of assets to holders of floating charges and unsecured creditors "Qualifying liabilities" = "wages and salary incurred after adoption of contract
Adoption of contracts Qualifying Liabilities Holiday pay and payments in lieu of holiday Not qualifying liabilities Statutory Redundancy Payment Sick pay Pay in lieu of notice Contributions to occupational pension schemes Damages for wrongful dismissal (dismissal without notice) Wages Payments for unfair dismissal Protective Awards
Personal Liability discrimination claims Spencer v Lh Lehman Brothers Administrators identified need to make redundancies Administrators asked one of the Company s managers to make recommendations from their team for redundancy Managerselected pregnantemployee employee without any form of consultation Pregnant employee brought claim for sex discrimination Claim bought against administrators as well as the company
Personal Liability discrimination claims Spencer v Lh Lehman Brothers Despite insolvency rules, in relation to discrimination : Administrator could be seen as acting as principal p with regard to the employees of the insolvent company and/or Administrators can in effect, appoint the insolvent company (or some of its employees) to act as their agent in relation to employment issues. Therefore administrator could be personally liable in a discrimination claim for: Their own acts Acts of the company Acts of the company s employees
Collective Redundancies Where making 20 or more employees at one establishment redundant in 90 days there is an obligation to: Notify Secretary of State Carry out collective consultation for a minimum period 20 99 employees = minimum period 30 days 100 + employees = minimum period of 45 days Penalties for failure to comply Protective award of up to 90 days gross pay for each affected employee (unsecured) Failure to notify Secretary of State Criminal Offence and 5,000 fine
The end of the Woolworths case Looked at question of when redundancies are at one establishment Employment Appeal Tribunal decided in 2013 our rules were incompatible with EU law
Previousposition under Woolworths Portsmouth 5 redundancies Southampton 21 redundancies Lymington 16 redundancies = Obligation to collectively consult as 41 redundancies in total
Position under Woolworths now Southampton 21 redundancies Portsmouth 5 redundancies Lymington 16 redundancies = Only obligation to collectively consult at establishment with 20 or more redundancies
Mitigating your risk the obligation to notify Secretary of State should ldbe notified: 45 days before the first dismissal when dismissing 100 or more employees 30 days before the first dismissal when dismissing 20 99 employees Unlikely l can comply. But ensure: Inform the company of the obligation to consult during any pre appointment pp discussions Notify the Secretary of State as soon as you are appointed if you think redundancies may be necessary Notify the local ljob centre and any other support organisations as soon as possible Record the reasons for your decision
Mitigating your risk collective consultation Defence available if there are special circumstances which h render it not reasonably practicable for the employer to comply with the requirement What s not a special circumstance? Insolvency Need to make redundancies quickly to achieve a sale Inability to achieve a sale without making redundancies No orders/work Has to be something out of the ordinary e.g. when a "sudden disaster" strikes a company
Mitigating your risk collective consultation Unlikely lk l will be able to comply, but do what you can to minimise the risks, e.g: Notify employees of risk of redundancy as soon as possible Ensure your template letters provide all the required information to employees Carry out as much consultation as possible even if it is all done on one day/morning Notify employee representatives (if there are any) Highlight the requirements to directors of the company pre appointment Make a note of the reasons why you ve been unable to comply
Collective redundancies Have your say Call for evidence on collective redundancies for employers facing insolvency End date 12pm 12 June 2015 https://www.gov.uk/government/consultations/c ollective redundancy consultation for employers consultation employers facing insolvency
The goodnews 75% reduction in Employment Tribunal claims from 2012/2013 to 2014/2015 However, reduction in multiple l claims li less significant ifi Claims for failure to consult in redundancy reduced by 67% compared to 2012/2013 but only 20% overall since 2008 Claims for failure to inform and consult regarding TUPE reduced by 21% compared to 2012/2013 or 13% overall Conservative Government likely to retain Employment Tribunal fees In/Out referendum on Europe means scope for further changes
The content of this presentation is for general information purposes only. It does not constitute professional advice (legal or otherwise) nor should it be used as such for any specific situation. The information should be read in the context of the entire presentation. We therefore cannot accept responsibility for any act and/or omission i based on the material contained in it. Coffin Mew LLP 2015