Solicitors for Employees whose Employer is Insolvent

Our employment law team have considerable experience in advising employees whose employer (i.e. a company) is insolvent and the employment issues relation to this.  The issues which we generally deal with include transfers to another employer, dismissals, non-payment of wages, accrued holiday and statutory redundancy payments (where applicable).

IBB Law’s employment law team can provide clear, practical guidance on issues relating to insolvent employer. Our team includes some of the region’s top ranked employment lawyers with decades of experience representing employees of all levels.

For advice on issues surrounding insolvent employers, please contact our experienced employment solicitors today on 03456 381381 at our local offices in Beaconsfield, Reading and Uxbridge, or you can email your details to employmentlaw4you@ibblaw.co.uk.

What is an insolvent employer?

An employer will be insolvent when it cannot pay its debts as they fall due and/or its liabilities exceed its assets.

A company that is in financial difficulties can:

• make changes to its business (e.g. to reduce the costs of its operations and so increase cash generation and profitability)
• come to an agreement with its creditors with a view to restructuring its liabilities
• enter into a formal insolvency process, in which an insolvency practitioner takes over the management of the company’s affairs. The insolvency practitioner could be an administrator, a liquidator, an administrative receiver or a receiver depending on the type of insolvency process being followed.

How does corporate insolvency affect you?

An insolvent company is likely to result in redundancies to save costs, often without following due process with those affected employees. Therefore, you may have various claims against your insolvent employer, including claims for:

• unpaid wages, benefits and notice pay
• statutory redundancy pay (i.e. based on your age and length service and capped at the statutory weekly amount)
• unfair dismissal
• protective award where collective redundancies have been made without the required statutory information being given or consultation taking place
• award for failure to inform and consult under Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).

Issuing a claim against an insolvent employer?

You can issue an employment tribunal claim against your insolvent employer.

The insolvency practitioner that has been appointed on behalf of your employer will normally have the power to defend claims made against the company.

If you do not know the details of the relevant insolvency practitioner for your employer company, this can be obtained from Companies House.

If the company is in administration (or compulsory liquidation), your employer is protected by a stay on issuing or continuing legal proceedings and can only be lifted with the consent of either the administrator or the court under the Insolvency Act 1986.

Even if your employer is in administration or compulsory liquidation, you must still issue an issue an employment tribunal claim irrespective of receiving prior consent due to the strict time limits for bringing tribunal claims (i.e. 3 months less a day, which can be extended by Acas early conciliation). Having issued the claim, you should then apply to the administrator for permission for the stay on proceedings to be lifted to allow you to pursue the claim. If permission is not granted by the administrator, or in cases of compulsory liquidation, you should apply to the court with conduct of the insolvency proceedings for the stay to be lifted.

When considering to lift the stay on proceedings for a company in:

• administration – the court will follow the guidelines in Re Atlantic Computer Systems plc and carry out a balancing exercise between the legitimate interests of the applicant and other creditors. It will be for you who is requesting the stay to be lifted to make out your case. Leave will be granted if the action is unlikely to impede the achievement of the purpose of the administration.
• compulsory liquidation – the court will allow the claim to proceed if it is fair and right to do so in all the circumstances. In practice, the application of this test is likely to involve a balancing of interests similar to that in the context of administration. However, you will have to show why you need to bring proceedings against the company rather than simply claiming your share of the distribution of the company’s assets.

Where claims are brought simultaneously against a company in administration and other respondents that are not in administration (e.g. another company relying on a transfer), the statutory moratorium does not prevent proceedings being continued in respect of those other respondents.

For further information about how to bring an employment tribunal claim, please click here

Claims where there has been a TUPE transfer

Where some or all of the assets of the company have been sold, employment liabilities (which could include pre-transfer dismissals) may have also passed to the buyer of the assets pursuant to TUPE. This will be determined by the nature of the insolvency proceedings and the assets which have transferred.

If TUPE does apply to the sale, you should issue proceedings against both your original employer (i.e. the seller) and the new company (i.e. the buyer) that has acquired the assets.

For further information about TUPE, please click here

Enforcing a judgment debt against an insolvent employer

If you are successful with your employment tribunal claim, you will need to claim an award as part of the insolvency process. Tribunal awards, such as the basic and compensatory awards for unfair dismissal or damages for discrimination or wrongful dismissal are ranked equally with other unsecured debts and so are unlikely to be paid out in full or at all.

Claiming from the National Insurance Fund

If your employer is insolvent and your employment has been terminated, the National Insurance Fund (NIF) guarantees payment of a basic minimum of certain employment debts.  This includes:

• up to 8 weeks’ arrears of pay (capped at current weekly maximum statutory limit)
• holiday pay
• up to 6 weeks’ notice pay
• a statutory redundancy payment (capped at the weekly current maximum statutory limit)
• a protective award.

You can make a claim from the NIF online, please click here

Payment from the NIF does not prevent you from claiming from the insolvent estate as well e.g. debts which are not guaranteed by the NIF or debts in excess of the amounts guaranteed by the NIF.

Therefore, you should make claims from both the NIF and the insolvent estate to maximise your chances of recovering some of the debts owed.

Claiming from the HM Revenue & Customs

If your employer becomes insolvent, liability passes to HM Revenue & Customs from the date of the formal insolvency for:

• unpaid statutory sick pay
• statutory maternity pay
• statutory paternity pay
• statutory adoption pay
• statutory shared parental pay.

For further details, please click here

Claiming from the Pension Protection Fund

If your employer becomes insolvent, the Pension Protection Fund may also pay out compensation to members of a defined benefit scheme whose pensions have been affected by a participating employer’s insolvency.

For further details, please click here

Contact our specialist employment insolvency solicitors today

IBB Law’s employment law specialists represent individuals at all levels no matter the size or sector of the company. If you have an issue regarding your insolvent employer, we can offer fast, reliable guidance on what to do next.

Contact our specialist employment law solicitors today on 03456 381381 or email your details to employmentlaw4you@ibblaw.co.uk.

The material contained in this web page is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken.