Insolvency practitioners will have received a letter from Ian Lucas MP, Minister for Business and Regulatory Reform, at recently renamed the Department for Business Innovation and Skills (BIS). Mr Lucas said he had written to all the RPBs reminding them that where an IP has failed to consult or notify before making redundancies, they should take disciplinary action. BIS has been asked to monitor cases where protective awards are made where an IP was involved, and to monitor what action, if any, their RPB decided to take.
You will know that, where redundancies of 20 or more employees at one establishment are anticipated within 90 days, the employer (including insolvent companies acting by their administrators) has to notify the Secretary of State, and consult with employees’ representatives (normally trade unions) at least 30 days before the dismissals take effect. The time period extends to 90 days if 100 or more redundancies are proposed.
Failure to consult can lead to a protective award, and failure to notify the Secretary of State is a criminal offence. There are exceptions for 'special circumstances', but insolvency itself is not automatically a special circumstance.
All too often, IPs find they have a matter of days to complete a going concern sale, before the business falls apart due to hostile creditor action, refusal of suppliers/customers to support the business, employees walking out, or all of those. In a bid to preserve monies for creditors, redundancies may be required, but the consultation period can be far too long.
Has anyone recently experienced this tension between a duty to consult on the one hand, and the need to preserve a fragile business on the other?