After nearly nine years and a couple of visits to the Supreme Court, the attempted prosecution of
Unfortunately, we do not have any information as to why "no evidence" was offered. 32 years and there has not been a successful prosecution of an individual director under s194. Does this indicate that the potential criminal penalty is more a risk in theory and lacks any likelihood of enforcement? Or perhaps it means the threat of personal criminal liability is working as a deterrent. Alternatively, it may indicate that the requirement to notify the Secretary of State via a HR1 form (and the requisite time period before dismissals take effect) is a relatively simple administrative task, approached by employers as merely part and parcel of the wider collective information and consultation obligations under section 188 TULRCA. As such, the threat of a potentially hefty protective award is in reality the driving force for compliance. Nevertheless, the potential risk of a criminal sanction against an employer and certain individuals (including directors) remains.
Here, we consider the end of the long-running Forsey saga in detail.
Collective redundancy consultation obligations
Obligations to inform and consult with staff regarding large-scale redundancies are well known, as is the need to notify the Secretary of State via the Redundancy Payments Service (RPS). Under section 188(1) of the
HR1 form and the criminal offence
Under section 193 of TULRCA, an employer has an obligation to notify the Secretary of State using a HR1 form. This is triggered when the employer first 'proposes to dismiss' as redundant 20 or more employees within any period of 90 days or less. It must be submitted giving notice of termination to employees, and at least 30 days (or 45 days if it is 100 or more redundancies) before the first of those dismissals take effect.
The obligation to notify the Secretary of State is sometimes seen as an administrative task with employers unaware of the potential criminal penalty for failing to do so. However, failure to give the Secretary of State the requisite notice before the dismissals take effect is a criminal offence for the employer under section 194 TULRCA. Furthermore, individual directors, company secretaries, managers or similar officers of the company (or anyone 'purporting to act' as such) are personally liable for offences committed by the employer if it can be shown that the offence was committed with their 'consent or connivance' or if it was "attributable to their neglect".
The penalty is now an unlimited fine, although in
Statutory defence
As is the case in relation to the duty to collectively inform and consult under s 188, there is a potential 'special circumstances' defence to a failure to give the Secretary of State the requisite notice under section 193(7) which essentially mirrors section 188(7). There will be no liability where there are special circumstances which mean it is not reasonably practicable to submit the form on time. However, it is well established in relation to the corresponding section 188(7), and it is reasonable to draw across the same principles here, that this has to be something 'unexpected' or outside of the ordinary run of events, such as the destruction of the plant or sudden withdrawal of supplies by a main supplier. The fact of insolvency in itself will not offer protection, nor will a desire to keep a precarious financial position confidential to avoid further reducing the value of the assets or the business.
The case against
In
The case has been long and drawn out. Between 2016 and 2021, both
The 2015
As set out above, the fact of insolvency in itself will not amount to a "special circumstances" defence. At the same time if a decision is made to put a company into administration, this does not immediately signify guilt unless:
-
The decision to put the company into administration means that redundancy is an inevitable consequence or so nearly inevitable as to render it a proposal.
- The company then does not notify in accordance with its obligations.
- This failure was due to the director's consent, connivance or neglect.
In 2015, the prosecutions of three former directors of City Link for their part in City Link's failure to give statutory notice to the Secretary of State failed. The directors were acquitted as the Magistrates Court accepted that the directors did have hope of a quick sale out of administration and so where not "proposing to dismiss" at the time the company was put into administration.
For employment law purposes, "proposing" means more than a mere contemplation of the possibility of redundancies but is still generally found to occur at an earlier stage than an actual decision by the employer to make redundancies. In City Link, the judgment refers to the reasoning of the
Where does this leave s194 TULRCA?
The prosecution of
Nevertheless, there remains a risk for employers and directors (and the other relevant individuals) to face personal criminal liability for failure to notify the Secretary of State of large-scale redundancies. Although a successful criminal prosecution of a director under s194 TULRCA has been elusive, the obligations on employers to (1) inform and consult about large scale redundancies under s188 and (2) notify the Secretary of State under s193 remain vital with significant financial implications for the employer. A company, even one in administration, is subject to the obligations to inform and consult with staff regarding large-scale redundancies under s188. A company who fails to comply, faces a potential hefty penalty of a protective award (maximum of 90 days' uncapped actual pay per employee) being made for failure to properly inform and consult staff. The fact that an employer company has gone into administration does not obviate the need for compliance with sections 188 and 193.
Where a company is placed in administration, the significance of a protective awards for secured creditors is that they may be treated as preferential debts (subject to the Ł800 cap per employee) where the protected period includes the four-month period before the "relevant date" of the insolvency proceedings (as defined in section 386 IA 1986). As such, preferential debts rank ahead of floating charge realisations, an award could have a significant impact where there are large numbers of employees. Amounts due under a protective award may also be treated as "arrears of pay" for the purposes of the RPO's guaranteed debt liability (subject to the cap of eight weeks' wages at Ł643 per week (Ł700 from
For more information on this case or TULRCA 1992, contact
Read the original article on GowlingWLG.com
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Ms
Two Snowhill
Snow Hill Queensway
B4 6WR
Tel: 4168627525
Fax: 4168627661
E-mail: james.hatch@gowlingwlg.com
URL: www.gowlingwlg.com
© Mondaq Ltd, 2024 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source