Administration and Employment Law


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Administration and Employment Law

  1. 1. Administration and employment law James Willis Head of Employment stevensdrake solicitors
  2. 2. Administration Commonly initiated insolvency process  HMV, Comet, Clinton Cards, JJB Sport, Jessops  32 significant retail chains in administration in last year (FRP Advisory) Aimed at facilitating the rescue of an ‘insolvent’ company Various employment law issues arise Plenty of interesting(?) case law of late
  3. 3. The role of the Administrator They are appointed to manage the affairs, business and property of the company They must act:  fairly and reasonably  in the interests of the creditors as a whole They are agents of the company, acting on behalf of the company
  4. 4. The role of the Administrator (cont’d) Administrator must perform his functions with the objective of:  rescuing the company as a going concern  achieving a better result for the creditors as a whole than if the company were wound up without first being placed in administration  realising property in order to make a distribution to one or more secured preferential creditors Objectives have a strict order of hierarchy
  5. 5. Employment contracts The Administrator has to decide whether to ‘adopt’ the contracts of employment ‘Adoption’ is an all or nothing deal (Powdrill v Watson (1995)) Normally deemed to have adopted employment contract, if employment relationship continues for 14 days after appointment
  6. 6. Employment contracts Once adopted:  wages and salary (including holiday pay and sick pay)  contributions to pension schemes have ‘super priority’ over most other liabilities (including Administrator’s fees and expenses) Bonuses - are they due under the contract? Some liabilities do not have ‘super-priority’ status, eg:  statutory redundancy payments  damages for wrongful dismissal  some payments in lieu of notice NB Preferential debts and ordinary unsecured debts
  7. 7. Redundancies What if a redundancy situation arises during the administration? The normal rules apply  Collective consultation  20 or more redundancies = 30 days’ consultation  100 or more redundancies = 90 days’ consultation  Individual consultation  Abide by normal standards of good practice Do as much as you can And take care…
  8. 8. TUPE - it can trip you up What is a TUPE transfer?  When  a business (or part of one) transfers from one person to another; or  activities are contracted-out, contracted-in or re-tendered the employees transfer along with the business/activities. What are the implicatons of a TUPE transfer?  All liabilities etc transfer with the employees  Employment contracts cannot be changed  Obligation to inform (and consult) employee representatives  Obligation to provide ‘Employee Liability Information’  TUPE transfer-related dismissals are automatically unfair
  9. 9. Spaceright v BaillavoineThe facts: Company went into administration CEO (Bruno Baillavoine) was dismissed Business and assets sold as a going concern a month later BB claimed that he’d been automatically unfairly dismissedThe decision: Not a genuine redundancy – company needed a CEO Dismissal aimed at making business more attractive Dismissal automatically unfair (it was connected with a proposed TUPE transfer) Liability may transfer to purchaser
  10. 10. Disciplinary and grievance handling Follow normal policies and procedures Follow ACAS Code of Practice on Disciplinary and Grievance Procedures Put simply…  Letter  Meeting  Outcome (with opportunity to appeal)
  11. 11. Administrators’ LiabilitiesWright Hassell LLP v Morris Administrator instructed lawyers under CFAs Lawyers went unpaid (Boo! Hiss!) Lawyers sued successfully (Hooray!) Lawyers couldn’t hold administrator personally liable (Hmm!)
  12. 12. Employment Claims Claimants need to file a claim before time limit expires Claims likely to be ‘stayed’, pending consent from the Court or Administrator Each request viewed on its own merits
  13. 13. Insolvency and TUPE TUPE 2006 intended to encourage a ‘rescue culture’ Two types of insolvency proceedings under TUPE 2006:  “Bankruptcy proceedings or analogous insolvency proceedings…instituted with a view to [liquidation]”  “relevant insolvency proceedings” opened not with a view to liquidation What about Administration?  Contradictory decisions  Oakland v Wellswood (EAT)  ‘Fact-based’ approach (depends on intentions of Administrator etc)  OTG Limited v Barke (EAT)  ‘Absolute’ approach  Administration can never constitute ‘bankruptcy or analogous insolvency proceedings’  Key2Law (Surrey) LLP v De’Antiquis (CA)  Solicitors – again!  Law firm (LLP) in administration  ‘Absolute’ approach is correct  Administration is ‘relevant insolvency proceedings’  Appeal to Supreme Court?
  14. 14. Bankruptcy proceedings etc… Main TUPE provisions don’t apply But the obligations to inform and consult still do A rather odd picture emerges
  15. 15. ‘Relevant insolvency proceedings’ TUPE applies (with amendments)  Some liabilities remain with transferor (and can be claimed from NI Fund) eg:  up to 8 weeks’ arrears of pay  pay in lieu of statutory minimum notice period  up to 6 weeks’ holiday pay  Basic Award / Statutory Redundancy Payment  All other liabilities still transfer  Some variations to employment contracts permitted  Transferor/Transferee and employee representatives can agree changes  Must safeguard employment by ensuring survival of business  Employee agreement required?  Too complicated / too risky?
  16. 16. Pressure Coolers v Molloy (2012)The facts: Mr Molloy employed by Maestro Plans to sell assets via a ‘pre-pack’ to Pressure Coolers (PC) PC asked for Molloy and 6 others to be dismissed Sale proceeds, but dismissals not effected until after transfer Molloy brings claims for unfair dismissal, wrongful dismissal, age discrimination, failure to consult etcThe decision: Molloy’s claims succeeded against PC Liabilities arose out of dismissal occurring after transfer Liabilities rested with PC, not with Maestro / NI Fund
  17. 17. Pressure Coolers v Molloy (2012) Points to note  Watch out for a buyer’s demand for dismissals  Would the dismissal simply make the business more attractive?  Could it be a genuine redundancy?  Will the buyer walk away/ask for a price cut if the demand is not accepted
  18. 18. Another TUPE issueSNR Denton UK LLP v Kirwan (2012) The facts  Company in administration  In-house lawyer made redundant after 5 days  SNR instructed to undertake various legal work  In-house lawyer argued that TUPE applied The decision:  TUPE doesn’t apply  Identity of the ‘client’ has changed  ‘Client’ is Administrator, not company in administration Points to note  Check the contractual terms  This may not be an end to the matter
  19. 19. Questions?