A recent decision of the Court of Appeal is a useful reminder to receivers that contracts of employment between the company in receivership and employees continue to subsist.
A receiver must properly comply with the termination provisions in a contract of employment and has no additional powers to dismiss an employee over and above what powers the employer entity has to dismiss.
Employee dismissal by receiver
In this case an employee of a company in receivership was given one weeks notice of termination of employment notwithstanding that the employment contract provided for three months notice. It was argued that the company needed to cut costs and that this justified the lesser notice.
The employee obtained a High Court injunction, arguing that one weeks notice was in breach of contract and therefor not valid. The matter was appealed to the Court of Appeal and the employee was again successful on appeal. Separately, the employee also initiated a claim for unfair dismissal.
Message for receivers
The message here is a reminder to receivers to tread carefully if considering termination of contracts of employment in breach of the termination provisions, as this could give rise to costly High Court proceedings.