The Employment Appeal Tribunal (EAT)[1] upheld an employment tribunal’s decision that the claimant, Mr Chaudhry, could not recover a basic award for unfair dismissal following their employer’s insolvency unless an employment tribunal had determined the claim and made an award.

Why is this relevant to administrators? Because for an employee to bring a claim the administrator must give permission for the employee to bring or continue such a claim given the existence of the moratorium.   The question this decision helps clarify, is whether administrators should do as a matter of course.  It also helps clarify, that for employees, they need the employment tribunal to determine a claim for unfair dismissal in order to make any recoveries following the employer company entering administration.

An officeholder does not have to consent to a claim or action being taken that would be in breach of the moratorium.  There may be reason not to – for example, consenting to a landlord forfeiting a lease might adversely impact the outcome of the administration. 

Even if an officeholder does not consent, the claimant can apply to court for permission to act in breach of the moratorium, but that shouldn’t be the fall-back position for an office holder because it carries the risk of costs if the court finds that an office holder should have consented and did not.

In this case the administrators did not consent to Mr Chaudhry bringing his claim, although the judgment does not explain why.  Mr Chaudhry could have sought the court’s permission to bring the claim but did not. 

The Secretary of State is only obliged to pay a basic award for compensation once that has been determined by an employment tribunal.   The EAT found that an “award” in this context means a decision that a payment should be made, not merely an entitlement to one.

Because Mr Chaudhry did not obtain consent or seek the court’s permission to bring the unfair dismissal claim, he did not ultimately obtain an award for compensation and therefore the Secretary of State was not obliged to pay.

Had Mr Chaudhry sought permission to bring the claim it is likely a court would have given that, but there is a note of warning to administrators in the judgment about the potential costs of refusing an employee requests for consent – read further below.

Approach of administrators to requests for permission to bringing an employment claim

As the judgment highlights there is, provided the requisite comfort is sought from the employee, no reason why administrators should not consent to a request by an employee to bring or continue a claim for unfair dismissal. 

The judgment provides this reassurance:

“An administrator or liquidator of an insolvent employer who is faced with a request for permission to proceed with a claim, coupled with an undertaking that the employee wishes to do so for the purpose only of obtaining a basic award of compensation for unfair dismissal from a tribunal, would do well to consider carefully consenting to the request. Acceding to such a request should not prejudice other creditors provided no assets of the insolvent employer are spent on defending the claim.

In such a case, it would be for the Secretary of State to consider whether to raise any defence to the claim – for example, that the dismissal was fair ……. An administrator or liquidator who is willing to accede to such a request should be comforted by the employee’s undertaking not to pursue the claim for any other purpose than to obtain a basic award and then recover the amount of that award from the Secretary of State, not the insolvent employer. Any compensatory award would be an ordinary debt without any priority over other creditors; or the employee might undertake not to seek a compensatory award.“

However, the judge goes on to say that if consent is not granted when an employee has undertaken not to pursue the claim for any other purpose than to obtain a basic award, the office holder might be exposed on costs.

Concluding Thoughts

Where an employee seeks consent from an administrator to bring a claim, gives an undertaking to pursue the claim only for the purposes of obtaining an award to allow them to recover that from the Secretary of State and there is no prejudice to other creditors there is no reason why the administrator should not consent in those circumstances – in fact, if they do not, there might be a risk of a costs order against them should the employee then apply to court for permission to bring the claim.

[1] Chaudhry v Paperchase Products Ltd & Another [2025] EAT 181