Employment Issues For Administrators

Author:Mr Keir Halcomb
Profession:Shadbolt LLP
 
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Retaining Employees

An administrator has up to 14 days following their appointment

to assess whether to adopt any of the employees' employment

contracts. This window of opportunity gives the administrator time

to evaluate the business and, if any part of it is viable, identify

which employees should be retained. Administrators will be treated

as having adopted an employment contract where an employee is

retained and paid on their existing terms beyond the 14 day period.

Where employment contracts are adopted by the administrator, the

company is still the employer with the administrator acting as the

company's agent. While the administrator is not personally

liable for the contracts they adopt, any wages or salary payable in

respect of such contracts will be paid even before the

administrator's own fees if the administrator has not paid them

before they leave office.

The administrator can avoid adopting employment contracts

by:

achieving a disposal of all or part of the company within the

14 day period; or

before the expiry of the 14 day period, ceasing to paying

employees of the company if they consider that there are

insufficient assets to meet the ongoing salary of the

employees.

The Impact of TUPE

In the case of an insolvent business which is subject to

bankruptcy proceedings or any insolvency proceedings, employees

will not automatically transfer to the buyer and dismissals will

not be automatically unfair. However, in the case of businesses in

administration, employees of the business have the same TUPE

protections as employees of solvent businesses with the following

important exceptions:

the seller and the buyer have greater flexibility in relation

to the variation of contractual terms (provided employee

representatives are consulted about and agree to the changes that

are made and that the purpose of the change is to ensure the

survival of the business or part of it); and

the buyer will not inherit liability for certain of the

seller's debts which are met by the National Insurance Fund

("NIF") up to statutory limits.

Managing Employment Liabilities

Where a potential purchaser is found, the level of employment

liabilities will impact on the purchase price. If the company is

not sold and employees remain, such employment liabilities will

dilute the assets available for creditors, except in so far as they

can be claimed from the NIF. Considered below are ways that the

administrator can manage the risk of increased employment

liabilitie...

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