Planning to avoid adverse publicity in Insolvency 2

Our previous City Link article highlights, in the main, the perceived poor treatment of many a business’s best asset…its workforce. Emotions naturally run high when any workforce is dismissed and more so when this is so close to the Festive Season.

A current legal case bubbling along in the Court of Appeal and now the European Court of Justice is the question of whether large bodies of employees must be consulted before they are dismissed. It is a legal requirement to give 45 days notice (recently reduced from 90 days) to a workforce comprising more than 20 employees, but this requirement cannot often be complied with in insolvencies. Failure to consult may lead to Protective Awards for employees of up to 90 days wages. This might seem fair but with say, the 3,200 employees at Woolworths, spread over several sites, this presents the directors with a headache and the Government with a hefty bill.

The current argument essentially boils down to the definition of a ‘site’ and The Advocate General has given his view that the underlying statutory duty to carry out collective consultation was the need to protect local communities from the impact of collective redundancies. This is not a final decision but it is indicating that consultation will only apply where there are 20 or more redundancies at a location (despite there being many more employees spread over the country). This may be good news for directors and stakeholders, with multi-site operations, who are facing the difficult choice of placing their business into formal insolvency. If you feel this might be an issue in your business, please contact us. An initial consultation is provided free of charge.