Burness

Edinburgh \ Glasgow

Morag HutchisonAugust 2012

Insolvency & Employment IssuesScottish Women in Insolvency Group

Burness

Edinburgh \ Glasgow

Burness

Edinburgh \ Glasgow

What are the issues?

•Risk of losing job

•Unable to recover money due

•Directors – wrongful trading

Employees•Employee

liability on adoption of contracts

•Making company attractive to potential purchasers

Insolvency Practitioners

•What employment liabilities they adopt

•Application of TUPE

•Possible redundancies/restructure

•No or limited warranties/indemnities

Purchasers

Burness

Edinburgh \ Glasgow

“Employment” issues

Employment Claims

Individual & collective

redundancy

TUPE

Continued employment

Burness

Edinburgh \ Glasgow

Impact of insolvency on employment?

Adoption of contracts

Impact of TUPE Individual/collective redundancy

Burness

Edinburgh \ Glasgow

Impact of insolvency on employment

Automatic termination

• Compulsory liquidation

• Court appointed receivers

Employee claims

• Wrongful dismissal

• No unfair dismissal claim (operation of law)

Burness

Edinburgh \ Glasgow

Impact of insolvency on employment

No automatic termination

• Creditor’s voluntary liquidation*

• Administration• Administrative

receivership**• Fixed charge

receivership• CVAs

Employee claims

• Wrongful dismissal• Unfair dismissal

claim

*Cannot use CVL to break continuity**Three exceptions e.g. Managing director

Burness

Edinburgh \ Glasgow

Adoption of contracts

14 days

• Insolvent company remains employer• After 14 days “adopt” contract• Adoption: employees paid in priority to administrators• “Wages and salary” only

Burness

Edinburgh \ Glasgow

TUPE: What is a “TUPE” transfer?

Production Line

Administrator sells...

...whole businessto purchaser

...part of businessto purchaser

“The transfer of an undertaking, business or part situated immediately before the transfer in the United Kingdom where there is a transfer of an economic entity which retains its identity”

Burness

Edinburgh \ Glasgow

Automatic transfer of employees

Liabilities transfer

EmployEmployees T&C’s preserved and variations are void unless ETO reason

PARTIES CANNOT CONTRACT OUT

Dismissals connected to transfer unfair unless ETO reason

TUPE: Five star protection

Automatic transfer of employees

Liabilities transfer

Duty to inform & consult

Burness

Edinburgh \ Glasgow

Automatic transfer of emplo/yees

Liabilities transfer

EmployEmployees T&C’s preserved and variations are void unless ETO reason/greater scope to vary

Dismissals connected to transfer unfair unless ETO reason/disapplied

TUPE: Impact of insolvency

Automatic transfer of employees/disapplied

Liabilities transfer /not all debts transfer

Duty to inform & consult

“Relevant insolvency proceedings”“Bankruptcy proceedings”

Burness

Edinburgh \ Glasgow

Collective redundancy

20 or more employees in 90

days

30/90 day consultation

Consult employee

representatives

Commence on “proposal” Protective award

Burness

Edinburgh \ Glasgow

Q A

Burness

Edinburgh \ Glasgow

Morag.hutchison@burness.co.uk

0131 473 6029

Burness

Edinburgh \ Glasgow

@BurnessEmplaw @MoragHutchison