It is no great surprise that following the collapse of Carillion and with other retail businesses teetering on the edge, insolvency and corporate recovery is back in the news.
Some of the biggest casualties of entities like Carillion are the employees. Luckily, in the Carillion failure many jobs have been saved, but there is still a residual cost to employees who have to submit claims to the National Insurance Fund and the liquidator to recover payments for unpaid wages, holiday and sick pay.
In businesses of 20 or more employees, there is also an obligation to consult with employees before making them redundant, but in an insolvency scenario, there is often little or no time to enable the company or appointed officeholder to initiate or complete a consultation procedure. Consequently, employees may have a claim which could result in an award of up to 90 days’ gross pay. But in order to claim that award, the value of the claim has to be established by a tribunal or court which is why employees of a company in compulsory liquidation could face a greater than usual loss.
In a compulsory liquidation, proceedings against the company are automatically stayed and unlike in an administration where the administrator can consent to lift the stay, a liquidator in a compulsory liquidation cannot. Only the Court can lift the stay and that requires an application to court and the associated costs.
In the case of Carillion, it seems unfair to impose further costs on employees who have already lost their job, simply to enable them to establish the value of their claim for the purpose of making a claim to the National Insurance Fund and in the liquidation. Had Carillion entered administration, this issue is unlikely to have arisen because the administrators may well have consented to the employees bringing a claim (albeit that it may have been defended) – but the liquidators do not have the liberty of deciding that here.
Can the liquidators address this by seeking an order lifting the stay? It is an unusual step in a compulsory liquidation, but perhaps something which could be considered given the large number of affected employees. No doubt the liquidators will consider this, but if they cannot apply to lift the stay or if they are not willing to do so, the employees will be left further out of pocket if they have to bear the costs of a court application.