Last month you may have seen the news that the Department for Business Innovation and Skills (BIS) had decided to prosecute three former directors of City Link for failing to file an HR1 with the Secretary of State. This was understood to be the first prosecution of its type since the Trade Union and Labour Relations (Consolidation) Act came into force more than 20 years ago.
The Act requires employers proposing to make 20 or more employees redundant at one establishment within a period of 90 days or less, to give advance notice to BIS in form HR1 (30 days in the case of 20 to 99 redundancies and 45 days for 100 or more). Failure to do so is a criminal offence that is liable on summary conviction to an unlimited fine (prior to 12 March 2015, the maximum fine was £5,000). If the offence was committed with the consent, connivance or because of the neglect of any director, the director in question also commits an offence.
City Link went into administration on Christmas Eve 2014, with 2,356 redundancies being announced on New Year’s Eve. More redundancies followed, taking the total number of job losses to around 3,000. The subsequent cost to the Government’s Insolvency Service was in the region of £5m in statutory redundancy pay. BIS prosecutors alleged that City Link’s former managing director, finance director and non-executive director became aware that redundancies were inevitable on 22 December 2014, but the Secretary of State was not notified until 26 December 2014, when it was filed by the company administrator.
The judge’s decision was that, as at 22 December 2014, the three directors had every hope of saving City Link and its workforce by placing the company into administration and therefore, at that time, there was no proposal to make redundancies. The Judge accepted the defendants’ evidence that they believed a sale in administration was not only possible but probable.
The charges were followed a few weeks later by charges against the chief executive of Sports Direct, in relation to the collapse of USC (the fashion retailer owned by Sports Direct) and the redundancies of around 200 warehouse staff whom were given 15 minutes notice by USC’s administrator.
The prosecutions suggest a hardening of approach within the Government to a failure to notify where businesses are going bust (with the Government ultimately picking up the tab for redundancy payments) as well as a desire to hold company officers to account. Whilst it may serve as a useful reminder as to the importance of getting collective consultation right, in the majority of cases where the employer foots the redundancy bill, it seems unlikely BIS will intervene.