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Ben Jones
Ben Jones, Solicitor
Category: UK Employment Law
Satisfied Customers: 38377
Experience:  Expert in UK Employment Law
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I have worked for company A for 6 yrs (Part of holding group

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I have worked for company 'A' for 6 yrs (Part of holding group 1) and in Dec 2012 I received a letter advising that I (and 6 other members of staff) were being transferred to company 'B' (Part of holding group 2) and that TUPE reg's would apply. It now looks like the whole process was to restructure the assets and that the new company 'B' will be placed into administration in the coming months (and consequently taking holding group 2 down with it as well)

Are they allowed to do this? Does it now means that I will not receive the standard company redundancy package usually paid out and I will only be able to obtain statutory redundancy???
Submitted: 1 year ago.
Category: UK Employment Law
Expert:  Ben Jones replied 1 year ago.

Ben Jones :

Hello, my name is XXXXX XXXXX it is my pleasure to assist you with your question today. Were the enhanced redundancy terms part of your old contract pre-transfer?

Customer:

No - I am part of the senior team and I have been privy to the redundancy packages given out during closures over the last 2 yrs

Ben Jones :

So there was no guarantee that had you been made redundant by your old company you would have received a similar package?

Customer:

Not in terms of the enhancement (which was 30% annual salary). However, statutory + PILON (without the enhancement) from the company would have been c.£13k, but by claiming from the government scheme once the company goes into admin I will only receive c.£6k due to the caps

Ben Jones :

It's a tricky situation but the issue here is whether there was a genuine transfer of a business that would have triggered TUPE. The employer is free to restructure as they wish and if needed they can do what they have done here.


 


The issue now is what rights do you have when the company has gone into administration and you are facing redundancy. You already know about the statutory compensation scheme so I will not discuss that. However, if you are facing redundancy your employer has a duty to try and offer you suitable alternative employment within their company or with an 'associated employer'.


 


An associated employers are two employers where:



  • One is a company of which the other (directly or indirectly) has control; or

  • Both are companies of which a third person (directly or indirectly) has control.


 


So you may find that there are associated companies to the current employer that could offer you suitable alternative employment and that would avoid redundancy.


 


However, if that is not possible and you have to be made redundant, unfortunately the reality is that you will only be entitled to the payment offered by the statutory compensation scheme.

Customer:

I believe they have split and restructured to ensured there is no link between the companies i.e. no association (in order to ensure the administration does not creep and effect the profit making arm!)

Customer:

I am on very good terms and it feels like they want to look after us... is there any way that the initial company that will NOT go into admin (comp 'A') can provide something in writing that either a) guarantees our redundancy payment or b) offers us the same or similar position (along with carrying over our service)? I know that tupe won't apply, but if they can provide something in writing which obviously doesn't have an adverse effect in placing comp B into admin, they may look at providing it (I know this is an additional Q so happy to pay double for the advice)

Ben Jones :

you can certainly try and ask for something in writing from them but whether they would agree to that is another matter. I do not know what their feelings are about this and whether it is something they are willing to consider but this is something that can only be agreed between you and them. The issue is that with the second option they may try and guarantee you your continuous service but if the situation does not reflect that of the law where the continuous service is broken, it will be statute that prevails, not what you have agreed. In other words, if there is no valid situation that would preserve your continuous service, even if this has been 'guaranteed' by the company, this is not the law' intention and that would prevail in the circumstances

Customer:

Ok - they genuinely want to look after us but it's just trying to find a way that gives me piece of mind (i.e. in writing and not just by word of mouth). Whilst I work for comp B, c. 60% of my time is cross charged to comp A by way of management agreement. They obviously want / need me until comp B goes into admin, at which point I suspect they'll look for a cheaper version of me (which I'm relaxed about). So my last Q - can comp A legally provide something in writing to say it will cover my full redundancy costs if comp B goes into administration - even if the 2 companies are not associated or linked?

Ben Jones :

you can get something in writing which in effect will be a contract between you and Co A. It would the follow that if they do not adhere to its terms they would potentially be acting in breach of contract which would technically allow you to sue them in the county court.

Customer:

Thanks Ben... I'm just a little unsure about the legality of that. It feels like it completely contradicts the whole point of insolvency / administration i.e. having a 3rd party that can guarantee my redundancy costs - simply due to the line of debtors and their standings in the process

Ben Jones :

To be honest I am not 100% sure myself because I have not seen this happen in the past but I was just thinking aloud really about the best way to do it. I am not sure there are any official precedents for that though, having checked a few resources

Ben Jones :

my concern is that statute could trump this agreement as well so that you would only get your statutory rights if you formally challenge the employer

Customer:

That's disappointing. You've been extremely helpful. If you do come up with any way that they can provide me with piece of mind then please let me know (and I will be happy to pay for your advice). They obviously don't want me to 'jump ship' prior to admin, but if they can't find a way to guarantee my full redundancy costs, I will have no other option but to start looking now.

Ben Jones :

I will speak to a colleague to see if he can think of anything and if something props up will let you know

Ben Jones, Solicitor
Satisfied Customers: 38377
Experience: Expert in UK Employment Law
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