Redundancy Situations: Employer’s Failure to Notify and Personal Liability

27 October, 2015

Who can be held responsible for failure to notify BIS of a potential redundancy situation – the employer or its individual officers?

The answer is both.

Former officers of CityLink and USC (parts of Sports Direct) are to go on trial, and may be found personally liable, for precisely this reason.

This serves as a timely reminder that company officers should be aware of their obligations under the Trade Union and Labour Relations (Consolidation) Act.

Obligations

It is a legal requirement for an employer to give notice (30 or 45 days) to the Secretary of State in a prescribed form when there is to be a collective redundancy (the proposed dismissal of 20+ employees in a 90 day period). A copy of that notice must also be given to appropriate employee representatives. Exceptions to this requirement are very limited.

In cases of non-compliance, the focus has previously been on fines imposed on the employer. However, it is also the case that where failure to provide statutory notification was the result of consent, connivance or neglect by any director, manager, secretary or other similar officer they, as well as the company, will be guilty of the offence.

In the case of CityLink, two directors and a non-executive director are to go on trial. USC’s officer was a company secretary (and is now Sports Direct’s Chief Executive).

Why now?

The law has been in force for over 20 years but rarely used.

CityLink was a huge wake up call, with almost three thousand redundancies, which cost the government an estimated £5 million in statutory redundancy pay. It also led to MP’s urging an overhaul of the insolvency system to better aid workers.

So what?

If convicted as an individual, company officers can face a criminal conviction, fine and potentially a period of disqualification as a director. The fine, previously capped at £5,000, is now unlimited for offences committed after 12 March 2015.

The cases of CityLink and USC may be indicative of a change in approach by BIS and an increased likelihood of prosecutions of individuals in the future. Employers, and their officers, need to be clear of their responsibilities.