I have recently successfully represented another employee in a claim for a protective award against an insolvent employer.
In this case the employer entered into liquidation with no warning to the 24 employees, who were all immediately made redundant. There was no indication to the employees that their jobs were at risk and it came as a surprise to most of them. As the employer was at this stage in liquidation they did not receive notice pay, redundancy pay or pay for the last two weeks of employment, those payments having to be made from the Redundancy Fund.
The employer also failed to consult about the redundancy situation. As there were more than 20 employees to be made redundant, the employer should have consulted for at least 30 days before the first dismissal took place. Again this legal requirement was ignored.
The Tribunal found that there was a complete disregard to comply with the law and awarded the maximum amount of compensation of 90 days pay for each employee who was made redundant.
Despite this finding, the employer will not have to pay the compensation as he is insolvent. The liquidators, also, will not find themselves liable. The payment will have to be made from the Redundancy Fund, in other words by the taxpayers.
This is a situation that we come across time and time again. The insolvency process does not occur overnight but despite the fact that a company knows that it will shortly go bust, the employees are kept in the dark. Often the job of dismissing the employees falls to the administrators/liquidators but they ignore the legal requirements as they will not be personally liable if there is a subsequent award of compensation made by the Tribunals.
So not only is the taxpayer responsible for paying the employees their redundancy pay, notice pay, holiday pay and other unpaid wages, but they then have to also fork out millions of pounds for the deliberate breach of the duty to consult by the directors of the company and the insolvency practitioners.
The new Con-Dem government is keen to convince us that they stand for fairness, a phrase we heard all too often in the run up to the election and that they are eager to cut costs. Maybe they should consider reviewing the laws regarding the liability of company directors and insolvency practitioners. I’m sure that if the directors/insolvency practitioners suddenly found that they were responsible for paying out 90 days pay to each employee who was made redundant, rather than the payment coming from the public purse, then they would be able to comply with the consultation requirements and not leave employees finding themselves without warning out of a job.
For further information, please contact our Employment Rights department on 0113 245 0733.
Toni I understand where you're coming from but many businesses soldier on unaware of the abyss they're heading to because they don't understand their position until a creditor pulls the plug; often HM Revenue & Customs.
ReplyDeleteI have a few clients who continuously trade insolvent despite many warnings of impending doom and until the inevitable eventually hits the fan, carry on regardless.
If you feel the Lib-Con coalition should do something about it; tell them so; don't sit back and whinge; do something about it!
You could set up a petition; http://petitions.number10.gov.uk/steps
Have you thought about suggesting the trade union and employees taking a more proactive role in interoperating financial reports and judging for themselves the viability of the business they are employed by.
Maybe; if there was a greater understanding and involvement there maybe better cohesion between management and employees working towards a common goal.
Good luck!
Joe