Collective Redundancies Following Insolvency – Back In The Spotlight

Following the insolvency of Monarch Airlines Limited (in administration) (Monarch), a large number of employees of Monarch were made redundant. An employment tribunal has recently found of favour of a claimant who brought a claim against Monarch for its failure to comply with its employment law obligations to consult with employees before making a mass redundancy.

The decision brings back into the spotlight the obligations on a company and also insolvency practitioners when deciding to proceed with a mass redundancy programme. We previously wrote blogs on this subject in October and November 2015 involving the criminal charges brought against the former directors of City Link Limited (in administration) (City Link) for their failure to notify the Secretary of State of proposals for collective redundancies under section 193 of the Trade Union and Labour Relations (Consolidation) Act 1992 (the 1992 Act). Following a two-day trail the former directors of City Link were acquitted of those charges as the court found that the former directors could not at the relevant time have foreseen the redundancies and so were relieved of their requirement to give notice.

Case against Monarch

The case brought against Monarch considered Monarch's failure to consult with its employees before making mass redundancies on its entry into administration. Under section 188(1) of the 1992 Act, where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, the employer should consult about the dismissals all the persons who are appropriate representatives of any of the employees who may be affected. Under the provisions, the consultation should begin in good time but in any event, where the employer is proposing to dismiss 100 or more employees, at least 45 days - and otherwise, at least 30 days- before the first of the dismissals takes effect.

Where an employer fails to comply with its obligations under section 188, an affected employee may raise a complaint to an employment tribunal which may then make a protective award in favour of the affected employee if that complaint is "well-founded".

The protective award will be an order that the employer pay remuneration to the affected employee for the "protected period". The length of such period may be as the tribunal determines to be "just and equitable" in all the circumstances having regard to the seriousness of the employer's default but not to...