Reporting redundancies—lessons from City Link

Reporting redundancies—lessons from City Link

If insolvency looms, how should redundancy be reported? Sarah Rushton, employment partner at Moon Beever, comments on the recent case in which three City Link directors were 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.

Original news

BIS v Smith, Peto and Wright [2015] Lexis Citation 274

What offence were the directors charged with?

Under section 193 of the Trade Union And Labour Relations Consolidation Act 1992 (TULR(C)A 1992), if an employer is proposing to dismiss as redundant 20 or more employees within a 90-day period at one establishment, then the Secretary of State must be notified at least 30 days before the first of the dismissals takes effect where 20 or more redundancies are contemplated, and 45 days before the first dismissal where there are 100 or more redundancies.

Failure to comply with TULR(C)A 1992, s 193 is a criminal offence under TULR(C)A 1992, s 194.

Section 194 provides that individual directors, company secretaries and managers 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.

If convicted each individual is liable to a fine exceeding level 5. The £5,000 limit for level 5 fines was removed in respect of offences committed after 12 March 2015 (see section 85(1) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012)—the fine can now be unlimited.

Why were the directors charged with this offence?

In this case, the prosecution had alleged that it became obvious that redundancies would have to be made on 22 December 2014, when a turnaround plan to inject more money into the business failed. The business continued trading until 24 December 2014, when administrators took

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.