MPs plans to ‘rebalance’ employment law in the wake of the collapse of City Link have been welcomed by employment lawyers at Lodders Solicitors, who say any changes should aim to both protect employees and support employers faced with a company’s insolvency.
The joint report from two select committees into the collapse of City Link revealed that the current system ‘fails to sufficiently protect employees’, but Kim Klahn, an associate solicitor at Lodders and a specialist in employment law, says she is concerned that any subsequent changes must consider both affected parties: “City Link ceased trading in December 2014, with all workers and suppliers being given just a few hours notice of its collapse,” she explains. “The proposed recommendations would be helpful to employees who find themselves in the unfortunate position of being forced out of employment due to redundancy as a consequence of their employer’s insolvency.
“However, the report also recommended a review of the arrangements for sharing information when a firm goes into administration and clarification of redundancy requirements during the process. MPs recommendations will doubtless be welcomed by employees as they encourage employers to be more transparent with their work force about what is going to happen to the business when in troubled times and at an early stage in the process. Changes that are positive for both sides are important and must be encouraged.”
According to the report, City Link took a ‘deliberate decision’ not to tell employees and contractors it was about to go out of business until it was a ‘done deal’: “I can appreciate why an employer would want to wait until the last minute to notify its employees in order to essentially avoid a high financial penalty at an incredibly difficult time for the company,” says Kim. “A business in crisis is far from easy for the individuals involved across the organisation, but a director must act in a way that would be most likely to promote the success of the company for the benefit of its members as a whole, and this remains the same even when a business is facing insolvency.”
Lodders’ Solicitor Sonia Mangat, who advises on a range of dispute resolution matters and is a member of the Employment Law Association, adds: “The system and the employment laws relevant to insolvencies do need refreshing in order to bring these up-to-date so they more fairly reflect the realities of work today. Currently they do not represent an appropriate balance, as those who have given secure credit to a company are cushioned from the full impact of insolvency, because the losses are borne by its self-employed workers, contractors or suppliers.
“So any changes explored and ultimately implemented have to aim to rebalance the impact on both employees and the employers, and we are heartened that MPs are taking seriously the problems encountered by City Link and in turn its staff and suppliers.” MPs have also called on the government to tackle employers who use or encourage bogus self-employment. The report also urged the government to support dialogue between unions, employers and insolvency professionals to develop best practice guidance for sharing information ahead of an administration order.