City Link case highlights seriousness for directors of redundancy and insolvency situations

Scales of JusticeA case involving three former directors of the courier firm City Link has highlighted the urgent need for directors to take specialist advice in any redundancy or insolvency situation.

The men were charged with failing to properly notify the government about imminent redundancies prior to City Link entering administration on 24 December 2014. Prosecutors claimed the three directors became aware that redundancies were inevitable on 22 December 2014, however they did not file the form notifying the Secretary of State of the proposed redundancies until 26 December 2014.

Deputy District Judge David Goodman, sitting at Coventry Magistrates Court, held that although the business entered administration on 24 December, the directors believed the business could be saved and there was a possibility of a sale. The administrator, who was appointed on 24 December, had advised that the business should continue to trade until 26 December and that redundancies would be an option if no buyer was found by 31 December. The directors were acquitted as, on the evidence, there was no obligation to notify the Secretary of State about redundancies on 22 December, since at that time there had been no proposal to make redundancies.   

In this instance it appears the directors were found not guilty because they were shown to have genuinely believed that the business could be sold and the redundancies thereby avoided. However, the case underscores the seriousness of these situations and raises the possibility of future prosecutions of this sort where the evidence suggests redundancies were inevitable and the requisite notice was not given.

Collective redundancy obligations apply when an employer proposes to make 20 or more employees redundant at one establishment within a 90-day timeframe. As well as the duty to notify the government, employers are obliged to consult on collective redundancy proposals with unions or representatives of affected employees (or with the employees directly if they have no representatives) at least 30 days before the first redundancy if 20 or more redundancies are proposed, and at least 45 days before the first redundancy if more than 100 redundancies are proposed.  

Redundancy and insolvency legal advice

For expert advice on redundancy situations contact Gaby Hardwicke Employment Law Services Partner Paul Maynard on or 01323 435 900.

For expert advice on insolvency matters contact Commercial Litigation Services Partner Jeremy Laws on or 01323 435 900.

Posted: 23 November 2015

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