• International Workplace
  • 3 October 2019

Thomas Cook insolvency – a lesson in employee rights

In a statement to Parliament, Grant Shapps MP has provided an update on the Thomas Cook collapse and outlined the steps being taken to support employees affected. He said:

“The task before us represents the largest peacetime repatriation ever undertaken in the UK. In addition to supporting passengers, we have also been working across government to ensure the 9,000 former Thomas Cook employees in the UK and those overseas receive the support that they need as well.

“The decision by the Thomas Cook Group’s board has been deeply upsetting for employees who are losing their jobs.

“DWP’s Jobcentre Plus Rapid Response Service is in place, helping workers get back into employment. The Jobcentre Plus Rapid Response Managers across the UK are ready to engage with the liquidators to start that vital work.

“There are special arrangements for UK employees who are owed redundancy pay and notice pay by their insolvent employer: the Redundancy Payments Service in the Insolvency Service can pay statutory amounts owed to the former employees from the National Insurance Fund.

“My Rt Hon Friend, the Secretary of State for Business Energy and Industrial Strategy is establishing a cross-government Task Force to address the impact on employees and local communities. This will help to overcome barriers to attending training, securing a job or self-employment, such as providing childcare costs, tools, work clothes, travel costs.”

These all seem like positive steps but, as an employer it is important to know what employees’ rights are in the event of the liquidation of your business. Let’s take a look.

Employee rights

Employees have different rights depending on whether they are:

  • made redundant (dismissed);
  • asked to keep working; or
  • transferred to a new employer (if the business has been sold).

The employer must have a consultation about why redundancies are happening and if there are any alternatives – they do not have to consult employees directly.

If they are made redundant

An employee is made redundant if they’re dismissed from their job.

The person who is dealing with the insolvency (the ‘insolvency practitioner’ or ‘official receiver’) must tell employees how their job is affected and what to do next.

Employees can apply to the government for:

  • a redundancy payment;
  • holiday pay;
  • outstanding payments like unpaid wages, overtime and commission; and
  • money they would have earned working their notice period (‘statutory notice pay’).

Businesses can go through more than one insolvency. Employees cannot claim outstanding payments between the day of the first insolvency and the day they were dismissed, even if they did not know about the previous insolvency.

Employees can also apply to the court for compensation if they think they were dismissed unfairly or not consulted properly.

Compensation because of unfair dismissal

A claim can be made to the Employment Tribunal if:

  • an employee was dismissed unfairly (‘basic award’); and
  • there was not a consultation about the redundancy (‘protective award’).

Employees would be claiming against the Secretary of State for Business, Energy and Industrial Strategy and their former employer (‘the respondents’).

If an employee continues working after the insolvency

An employee may be asked to continue working for the employer after they become insolvent.

They would still be eligible to claim for redundancy pay and other money owed if they’re made redundant at a later date.

Employees cannot claim holiday pay, wages, bonuses or commission that they’re owed between the day of the insolvency and the day they were dismissed.

If an employee is transferred to a new employer

An employee cannot claim any money from the government if they were transferred before the employer became insolvent.

If they were transferred afterwards, they can apply for redundancy pay, statutory notice pay and outstanding payments such holiday pay, wages, commission and bonuses.

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