Workplace Closures

Workplace Closures

Employers with 20 or more staff in one workplace and legally obliged to consult with their employees if they consider that there is any chance that their business will cease trading altogether, or if it likely that they will have to make 20 or more staff redundant. This often happens in cases where a business is placed into Liquidation or Administration.

Where an employer fails to consult, staff are entitled to a protective award of up to 90 days pay.

Protective award for failure to consult

Failure to consult and failure to give notice are two separate legal obligations that employers have. As a result of this, employees who are dismissed without consultation, and notice, are entitled to separate lots of compensation for these two separate failings.  The requirement to carry out a consultation is very specific. It is not enough for the employer to say that they informed staff of the fact that there might be redundancies. In order for a proper legal consultation to be carried out, the employer must include the following –

  • Ways to avoid the dismissals
  • Ways to reduce the number of employees dismissed
  • Mitigating the consequences of the dismissals

An employer cannot defend a claim for the protective award in the Employment Tribunal unless they can satisfy the Tribunal that they have correctly followed these requirements. Generally speaking, there is no reasonable defence to these claims, especially where a workplace closes without warning. The employer would have to show that there was an unforeseen disaster that meant that the workplace had to close suddenly.

A physical disaster like a fire burning down a workplace might be a genuine reason for a workplace to close suddenly. However, financial ruin does not happen suddenly and the employer is likely to have known about the state of their finances for quite some time, especially in cases where the business falls into Liquidation or Administration. Liquidation and Administration won’t be accepted as a defence to a protective award claim.

Protective award compensation

The Employment Tribunal can award up to 90 days’ pay for the failure to consult. The Employment Tribunal might reduce the award if they find that partial consultation was done by the employer.

Generally, where a workplace closes the employer is in Liquidation or Administration and there will be no funds left to pay any compensation that is due for the protective award. The Government’s Insolvency Service will make a payment of compensation of up to 8 weeks’ pay for the protective award period. The Insolvency Service are able to make this payment from the National Insurance fund. However, they will only make this payment to any employee who has a Judgment in their favour from the Employment Tribunal. There is no automatic right to a protective award and unless you have a Judgment in your favour you won’t receive compensation.

Any weeks covered by the Judgment, in addition to the 8 weeks that the Insolvency Service can pay, can be claimed from the Administrator who is dealing with winding up the business. However, if you receive any payment for these additional weeks you are likely to only received a small percentage of what is due to you.

As well as being able to make you a payment for protective award, you might be able to claim the following payments from the Insolvency Service:-

Redundancy pay

If you have been employed for 2 years or more, you will be entitled to a statutory redundancy payment. This is based on your age and length of service at the date of your redundancy. You are entitled to receive the following amounts:

  • 5 week’s pay for each year of employment under the age of 22
  • 1 week’s pay for each year of employment from ages 22-40
  • 5 week’s pay for each year of employment from age 41 onwards

Payments are capped at 20 years’ service.

Notice pay

You will be entitled to statutory notice pay, which is completely separate to payment for the failure to consult. You will be entitled to receive 1 week’s pay if your service with the employer was between 1 week and 2 years. If your length of service was between 2 years and 12 years, you will receive 1 week’s pay for each year of service. Statutory notice pay is capped at 12 years of service.

Holiday pay

Any outstanding holiday pay that is owed to you at the date that your workplace closed will be paid to you by the Insolvency Service. The Insolvency Service will pay you any amount of accrued leave that you hadn’t taken at the date of your dismissal.

Outstanding wages

You can claim any outstanding wages that you were owed at the date of your dismissal. This includes any wages that you were due to be paid, which the employer failed to pay you and any overtime payments that you were due. This will be paid for a maximum of 8 weeks.

However, the Insolvency Service do count protective award and outstanding wages in the same category. As such, any amount of outstanding wages that you claim will be deducted from the amount of protective award that you can claim.

How we can help you

Losing your job without warning can be a stressful and difficult time. Our employment law specialists can guide you through the process of claiming the payments you are entitled to and deal with the legal work for the protective award on your behalf. Employment Tribunal time limits are strict and claims for protective award need to be pursued within 3 months of the date of your dismissal. Watermans can assist you in a sympathetic manner and make the process as stress-free and straightforward as possible. Contact us to start a claim.