Following the insolvency of Monarch Airlines Limited (in administration) (Monarch), a large number of employees of Monarch were made redundant. An employment tribunal has recently found of favour of a claimant who brought a claim against Monarch for its failure to comply with its employment law obligations to consult with employees before making a mass redundancy.

The decision brings back into the spotlight the obligations on a company and also insolvency practitioners when deciding to proceed with a mass redundancy programme. We previously wrote blogs on this subject in October and November 2015 involving the criminal charges brought against the former directors of City Link Limited (in administration) (City Link) for their failure to notify the Secretary of State of proposals for collective redundancies under section 193 of the Trade Union and Labour Relations (Consolidation) Act 1992 (the 1992 Act). Following a two-day trail the former directors of City Link were acquitted of those charges as the court found that the former directors could not at the relevant time have foreseen the redundancies and so were relieved of their requirement to give notice.

Case against Monarch

The case brought against Monarch considered Monarch’s failure to consult with its employees before making mass redundancies on its entry into administration. Under section 188(1) of the 1992 Act, where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, the employer should consult about the dismissals all the persons who are appropriate representatives of any of the employees who may be affected. Under the provisions, the consultation should begin in good time but in any event, where the employer is proposing to dismiss 100 or more employees, at least 45 days – and otherwise, at least 30 days- before the first of the dismissals takes effect.

Where an employer fails to comply with its obligations under section 188, an affected employee may raise a complaint to an employment tribunal which may then make a protective award in favour of the affected employee if that complaint is “well-founded”.

The protective award will be an order that the employer pay remuneration to the affected employee for the “protected period”. The length of such period may be as the tribunal determines to be “just and equitable” in all the circumstances having regard to the seriousness of the employer’s default but not to exceed 90 days.

In making its decision in this instance, the tribunal considered the guidance Peter Gibson LJ gave in Susie Radin Ltd v GMB [2004] I.R.L.R. 400 (CA). In considering the protective award, “the employment tribunal ha[s] a wide discretion to do what is just and equitable in all the circumstances, but the focus should be on the seriousness of the employer’s default”. The tribunal in Monarch found that the relevant employee representatives were only notified of potential redundancies three days before Monarch filed for administration.

Section 189(6) of the 1992 Act does provide a defence to employers if there were “special circumstances” which rendered it not reasonably practicable for the employer to comply with any requirement of section 188, or whether the employer took all such steps towards compliance with that requirement as were reasonably practicable in those circumstances. We previously noted in our articles on section 193 (which has an analogous defence to section 188) that insolvency does not of itself constitute a “special circumstance”. In this instance, applying the guidance from the Susie Radin case, the tribunal found there were no mitigating circumstances justifying a reduction from the maximum consultation period and giving 3 days’ notice of a possible insolvency event was not consultation. It considered that Monarch’s financial position did not deteriorate so rapidly that consultation was not possible and accordingly made a protective award of 90 days’ pay for each employee. The judgment is a reminder that a gradual run-down of a company is distinct to a sudden unforeseen event necessitating the closure of the business[1].

In this instance, as the employer, Monarch, was insolvent, the second respondent, the Secretary of State for Business Energy and Industrial Strategy was liable for the protective awards, subject to its maximum liability under section 184 of the Employment Rights Act 1996.

A link to the employment tribunal judgment can be found here.

[1] Clarks of Hove v Bakers Union [1978] I.R.L.R. 366