In collaboration with the R3 Policy and Public Affairs team, a response was submitted to the Department for Business and Trade’s consultation titled ‘strengthening remedies against abuse of rules on collective redundancy and fire and rehire’. Working with co-chairs of the Employee Working Group and members of the Policy Group, the response highlights the unique challenges faced by IPs in complying with collective redundancy consultation requirements during insolvency proceeding, advocating for a balanced approach that protects employee rights while also considering the interests of creditors and the need to facilitate business rescue efforts.

Below is a summary of key takeaways from the response:

Concerns raised

·        The tension between employment law and insolvency law on collective redundancy consultation requirements.

·        The impact of increased protective awards on creditors in insolvency situations. Such awards could discourage rescue efforts and harm employees' and creditors' interests.   

·        Clarification sought on several points in the proposal, including the definition of "insolvent firms" and the application of interim relief in insolvency situations.   

·        Increasing or removing the cap on protective awards will not benefit employees in most insolvency situations and may further dilute returns to creditors.   

·        Adding interim relief to protective award claims could add a catastrophic cost to the estates of insolvent companies and discourage IPs from taking on such cases.   

Recommendations

·        Government should recognise the difference between redundancy rules applied to solvent companies and those in a formal insolvency process.   

·        Guidance and training be provided to Employment Tribunal Judges on formal insolvency processes and the role of IPs.   

·        Proportionate attempts by IPs to consult with employees should be considered as mitigating circumstances when considering any award made by the Employment Tribunal.   

·        Employment tribunals should consider the impact of protective awards on creditors in insolvency situations.   

To assist with lobbying efforts, please email [email protected] with any evidence, whether data or case studies to support the claims made in the response.