As specialist lawyers for Claimants in Employment Tribunals and Courts, we often get involved in cases involving companies going bust (e.g. going into administration or liquidation), and dismissing large numbers of employees as a result. A good number of well-known companies have recently gone bust – City Link, BHS, Austin Reed and Phones4u. There are common themes to many recent insolvencies: quite often a background of poor management and weak financial control, often increased competition from new competitors (Austin Reed was adversely affected by the rise of internet retailers) and changes to the way the market operates (for example, with Phones4u the network providers wanted to cut out Phones4u and make direct sales to mobile customers). Rarely do these problems happen overnight though; they generally seem to build up over a period of years or at least months.
One thing that stands out for us is the way that human nature seems to cause an ‘ostrich’ effect within the senior management of troubled companies; they seem to initially ignore the problems, possibly in the hope that they will go away.
In our experience, it’s then sadly common for senior management to fail to let the employees know about the problems. To an extent this is understandable – it’s often a sign of failure by management and a cause of embarrassment. However, jobs and livelihoods are at stake. Families are affected, rent and mortgages need paying.
Further, European law requires an employer making twenty or more redundancy dismissals at a workplace to inform and consult the employees, via a union where recognised or (otherwise) via elected employee representatives. Why? To warn the employees, to help them understand the situation, get their feedback and input – often the employees at the sharp end may know the best ways for a company to cut costs, improve efficiencies and get out of the hole the company may be in.
Why does this often fail to happen? I fear that unlike our continental neighbours, we Brits have a historically poor tradition of consultative employee representation on the boards of companies. In the UK not many companies have an employee representative on their board. I think this partly explains why many of our companies have poor communications with their workers and why, when things get tricky, they make like ostriches.
Time and again, we’ve been told by ex-employees that they’ve been kept in the dark, hearing rumours of suppliers going unpaid and delays in paying wages. Sometimes, the rumours are that money is being transferred from the troubled company to another company or that new orders are being carried out by a different company with a similar name. Then, quite often, the first time they hear from management about the problem is when they are called into a meeting with management and the administrators (who arrive on site for the first time that day), telling them the company has gone bust and sending many employees home, often having dismissed them on the spot.
This has got to stop. Employers (and administrators) should comply with the law and inform and consult their workforce, well in advance of any redundancies.
But until companies take this on board, there are steps that employees can take where employers have failed to do the proper thing. A claim can be brought in the Employment Tribunals. If an ET is satisﬁed that there has been a breach of duty, they can make an order for what is called a “Protective Award”, which can include compensation of up to 90 days’ gross pay per employee.
There is no minimum amount of time employees must be employed to be able to bring Protective Award claims. The claims must, however, be started within 3 months (less 1 day) from the date of dismissal (in a collective redundancy situation).
What if the company has no money?
Where the company is insolvent the Secretary of State may ultimately be obliged to pay the Protective Award. The Secretary of State will, however, only pay up to a maximum of 8 weeks’ pay per employee, with a week’s pay being capped at £489. Any payment from the Secretary of State is paid by the Redundancy Payments Oﬃce out of the National Insurance Fund.
At Morrish Solicitors LLP we have years of experience in bringing multiple Protective Award claims for employees from across the UK.We have a proud record of winning and securing full protective awards for thousands of employees. For example, we have successfully represented employees in claims against Phones4u, Austin Reed, City Link, Bezier, Oakworth Joinery, 2e2, Jarvis, 4Children and Aqua Interiors, to name but a few. We are currently pursuing many claims on behalf of employees against other employers.
We can carry out a free review of a potential protective award case and if you have a viable claim, ‘no win, no fee’ terms may be available. Our service standards are high: we aim to bring your claim to an end as soon as possible, and to provide regular communications and assistance throughout.