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13-11-2015

Three directors of City Link were today acquitted of criminal charges in relation to their alleged failure to give 45 days’ notice to the Secretary of State of their intention to make mass redundancies.

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Under the Trade Union And Labour Relations Consolidation Act 1992 it is a criminal offence to fail to give at least 30 days’ notice prior to the first dismissal where 20 or more redundancies are contemplated and 45 days notice where 100 or more dismissals are contemplated. Giving notice is done by completing and sending off form HR1.

Actual prosecutions are relatively rare, but this area has come under increasing scrutiny following the large scale collapses of businesses such as Woolworths, Comet and others.

The problem is, that where businesses fail to notify the Secretary of State, there is usually a failure to inform and consult with employee representatives regarding the terminations. That entitles each affected employee to up to a protective award of up to 90 days gross pay. If the business cannot pay, this burden then falls on the state to discharge. Collectively the liabilities can be massive. If convicted, each director would have been subject to a fine not exceeding level 5 on the standard scale. Since 2012, level 5 fines are unlimited.

The prosecution had alleged that it became obvious that redundancies would have to be made on 22 December, when a turnaround plan to inject more money into the business failed. The business continued trading until 24 December, when administrators took over. However the Court accepted that there were no plans to make redundancies on 22 December and that the directors hoped that by placing the business into administration the company could have been saved.

The decision will come as a huge relief to others in a similar situation. Here, it seems that the directors were genuinely doing what they thought they could to save the business, albeit that those plans failed. The unions have been critical of the decision and have expressed concern that it lets bad directors off the hook.

More details can be found here.

Sarah Rushton (srushton@moonbeever.com)
Partner

This is intended for general information only and should not be considered as giving advice in relation to any individual case nor be taken as applying to any particular case. No liability is accepted for any such use of the information contained

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