Administrators facing prosecution over redundancies

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by Emma Lee 
| 8 December 2021

The High Court has decided that Administrators can be prosecuted personally for failing to notify the Insolvency Service about collective redundancies.

Following the recent decision in the High Court in R (on the application of Palmer) v Northern Derbyshire Magistrates Court, it was declared that an administrator can be held personally liable for failing to notify the Insolvency Service on collective redundancies as a result of a company being put into administration.

Under section 193 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), an employer proposing to dismiss 20 or more employees at one establishment within a 90-day period is under obligation to notify the Secretary of State in writing of his proposal. This must be done before providing notice to terminate an employee’s contract of employment under these dismissals, as well as giving at least 30 days before the first of those dismissals takes place. Failure to comply is a criminal offence.

In the above case Mr Palmer’s was a joint administrator of West Coast Capital (USC) Limited, with his responsibilities being ‘preferential claims’ and ‘employees’. In January 2015, USC filed a notice of intention to appoint Administrators, causing the USC warehouse to cease operations, which consequently would lead to the dismissal of 84 employees. USC went into Administration on 13 January 2015 and the following day the administrators made all warehouse employees redundant. The Insolvency Service questioned whether a HR1 had been sent, where it was found that it had overlooked sending the form which was subsequently emailed on 4 February 2015, despite being signed and dated by Mr Palmer on 14 January 2015. Criminal charges were issued against Mr Palmer due to his failure to comply with section 193 TULSCA.

It was the High Court’s decision which found the original ruling to be correct. An Administrator can be prosecuted under section 194 TULRCA. This was because when the Administrator assumes office, no one else could give statutory notice on behalf of the company without the Administrator’s direction. An Administrator is both an office of the court and an officer of the company.

Due to the confirmation of the decision, it is important that Administrators/Liquidators and Companies consider whether plans made for the company may result in redundancies of more than 20 people. If this is the case, the office holder should submit the HR1 without delay.

Dated: 8th December 2021

*Nothing in this article constitutes legal advice or gives rise to an advisor/client relationship. Specialist legal advice should be taken in relation to your specific circumstances. This article is provided for general information purposes only. Whilst we endeavor to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and we do not accept any liability for error or omission as it is based upon our interpretation of the law. Please be aware that the legal circumstances may have changed since this article was first published in December 2021 and you should contact us for specific up to date advice on your circumstances.

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