Employer in Administration - Are you aware of your rights?


Employment Law Partner

Mon 4 November 2019 Employer in Administration - Are you aware of your rights?


The sudden news of Mothercare entering administration has sent shivers up and down the spines of thousands of employees across the UK working for large companies who are finding life tough in the new retail environment.  We all know Mothercare as a staple of high street retail providers and wish it well for the future. 

There are some crumbs of comfort for employees that find themselves in a worrying situation such as an employer in administration. Whilst a company goes into administration, the administrators will try to sell the business as a going concern to a third-party buyer.  If a sale takes place, the new employer will take on the staff of the business that had been in administration.  However, if no buyer can be found, a company in administration will become insolvent and the likely result of this will be that all employees will be made redundant.

The law requires that a business contemplating making redundancies of 20 or more staff at one location must carry out an enhanced consultation procedure in good time before any redundancies are made. 

But what happens when the first time the workforce hear of the problems is when they are summoned to a meeting by administrators, liquidators, or ACAS, and told that the business has ceased trading with immediate effect and the vast majority of staff are no longer employed?

The law has safeguards to protect those who have been dismissed following a complete or near-complete failure to consult them.  Employees should take steps by consulting a solicitor to protect their position.  Provided there are more than twenty employees at one location, a group claim for a “protective award” can be made to the Employment Tribunal.  Your solicitor will check each individual employee for eligibility and give an estimate of what might be recovered per person. 

The claim, typically undefended by the insolvent business, progresses to a Judgment in favour of the employees at Tribunal.   The “protective award” is paid by the Government where the employer has ceased trading and become insolvent, subject to certain caps and limits, but the amount recovered by each individual employee could be up to eight weeks’ gross pay, there may also be other sums in addition such as holiday pay.

"Too often employees who are made redundant en masse are unaware of the power they have, as a group, to gain extra compensation paid by the Government for the manner of their dismissal without consultation.  Many of these employees have paid into the National Insurance fund for years and are entitled to claim the compensation available for the sudden and shocking way in which they are let go. "


- Luke Hutchings, Partner

If you're seeking advice on an employment matter, wish to instruct a Solicitor, or simply want to know more about your rights if your employer goes into administration, please click here.




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