Can I pursue an Employment Tribunal Claim against an Insolvent Company?

With no end in sight to the current recession, many companies are making redundancies and many more are being placed into liquidation. As a consequence Employment Tribunal claims can hit a dead end if the firm becomes insolvent.

I have come across a number of cases recently where, part way through a claim for unfair dismissal in the Employment Tribunal, the company has been placed into liquidation or administration. Often, to rub salt into the wound, the employee subsequently discovered that a new phoenix company has been set up in order to acquire the assets, goodwill and employees of the company in liquidation. There are a number of potential options open to an employee in such circumstances, namely:

The sale of assets and goodwill to the new phoenix company could be challenged on the basis that it is a transaction at an undervalue. In such circumstances, the directors could be personally liable for any loss to creditors.

A complaint could be made to the insolvency practitioner/liquidator that the conduct of the directors should be investigated. In many instances, it may be the case that the directors and shareholders have undertaken a similar phoenixing operation in the past. This could lead to the disqualification of the relevant directors.

Whilst making an employment claim during the process of insolvency can be difficult and certainly more complicated than if the company were in good health, the claim could still be successful. It may be worth seeking specialist employment legal advice before making a final decision.

 

As an employee you should consider the following:

1. Does the company’s insolvency have the effect of automatically stopping legal proceedings? For example, in an administration Employment Tribunal proceedings cannot be continued without the consent of either the Administrator or the Court. Similarly, Employment Tribunal proceedings cannot be continued without the permission of the Court once a winding up order has been made.

2. Can your claim be pursued to the National Insurance Fund for payment of unpaid wages, notice pay or a statutory redundancy payment? The National Insurance Fund will not guarantee payment of a basic award for unfair dismissal unless liability has first been assessed by a Tribunal. In such circumstances, if an employee’s basic award for unfair dismissal is particularly high, it may still be worth pursuing such a claim.

3. Is it worth pursuing the claim? If a claim is pursued for substantial compensation arising out of unfair dismissal or discrimination the legal costs involved would be high and if successful the compensation recovered would probably only be a small percentage of the full value of the claim from a company in liquidation.

4. Is it worthwhile submitting details of the claim to the company’s insolvency practitioner? On the basis of a recent High Court decision, such a claim would be provable in an employer’s insolvency even though no liability has been determined by an Employment Tribunal. However, the likelihood would be that an employee would still only recover a small percentage of the value of their claim.

Alan Lewis

About Alan Lewis

Alan joined Linder Myers in 1990. He became a Partner in 1998 and was responsible for setting up the Employment department in Manchester. Alan now leads the Employment team in the Manchester office. He mainly works from Manchester, although also acts for clients from the Lancashire office. Alan lives in Lancashire with his wife and son. His hobbies and interests include football, boxing, music (occasional guitar player) and supporting Oldham Athletic.

22 thoughts on “Can I pursue an Employment Tribunal Claim against an Insolvent Company?

  1. Peter from leeds

    Excellent advice my wife and I are currently in this position with a phoenix company and a member of the judiciary is part of the scam

  2. Jack from London

    I got shafted by a shady Publisher who employed me as a Credit Controller and dismissed me simply for taking a holiday when he owed me £7K in bonuses. My salary was £2K per month and it has taken five months to come to Employment tribunal (in January) however he has now entered the company into administration. ….. and carried on his business under the guise of a marginally different name – unabated …..He has done this countless time (33 failed directorships) I cant believe he’s allowed to do this…Now contemplating my next option which doesnt look very positive :( Any advice would be gratefully received please ? Thank you

  3. yvonne

    i have remedy award(may2012) against a company i worked for for 18mths. however,during another case against this same company,E.T.was informed by our employer that this company does not exist. The regional judge asked their new company name and directed that this would be the company my remedy would be varied to without documentary evidence that i ever worked for this new company. when remedy was varied,that same day the employer was in a meeting having this new company put into voluntarily insolvency. I now have remedy of £10,000 against a company that was never registered and does not exist.and a remedy against a company that i never worked for. Please someone, advise!!! thank you.

  4. Alan LewisAlan Lewis Post author

    Yvonne,

    It is difficult to advise without seeing the relevant judgments of the Employment Tribunal and the written reasons for the Employment Tribunal’s decisions.

    A detailed analysis would also have to take place concerning the status of the two companies you have referred to and what happened in the liquidation/insolvency proceedings of those companies. A key issue in your case would be who actually employed you. This would involve consideration of who paid your wages, whether any written contract of employment was in existence and, if so, who was named as your employer in that contract, from whose premises did you work and who actually gave you orders and direction when you were working?

    Another issue would be what the precise relationship was between the two companies you have referred to. An Employment Tribunal does have a discretion to add a Respondent if it thinks it is just to do so – even after a hearing has taken place or settlement has been reached. I am assuming that you were given the opportunity to make representations to the Employment Tribunal before it decided to add a Respondent to the judgment you obtained?

    Consideration would also have to be given to what happened in the voluntary liquidation you refer to as you may still have the right to recover some monies in that liquidation.

    1. yvonne hope

      Alan, thank you for your reply.The company that paid my wages was the company that was not registered on Companies House.They deducted n.i.and tax each week but Inland Revenue have no records of this.I produced copies of wage slips showing these deductions and my P60 is in this non existent company name,as are other employees. The director is my employer.he is director of many companies that I have compiled documentary evidence against.The company that my award was against was still trading when it applied for insolvency.The I.P. has all evidence of from me. The company have detailed that they spent £169,000 for work on their RENTED premises prior to this insolvency. They then continued to trade from same premises with same fixed assets but changed their company name.This new name has already been used by them but it dissolved some years ago,it is now a different registered number.The initial insolvency was halted as H.M.R.C. were also a creditor. Now,however,I have letter from I.P. stating that there will be a meeting in December to liquidate company,even though she has not produced any receipts for this alleged work.Even though she has evidence of £258,000 assets unaccounted for.My dilemma is that I cannot afford a solicitor or the means to begin court proceedings. This director has continued to be fraudulent for over 10 years with every company and I have all the evidence.I am fighting the system,professional bodies and now it seems,justice itself.

  5. angieeg

    I have an award from an employment tribunal against a limited company I’d worked for for over 20yrs. This was because I was made redundant without meaningful consultation when the company went insolvent. The directors set up a Phoenix company and bought the workload and goodwill at a low price. During the final weeks of working directors lost vigour when chasing invoices and payments and the Phoenix company had been registered three months earlier by their solicitors. I received no payment of any kind on my last day. I have received some funds for redundancy from the insolvency office but my award is for compensation due to the lack of consultation. Is their anything I can do to get the award changed to name the directors or their new company rather than the former company now with liquidators?? Thank you

  6. barth

    The employment tribunal hearing was on 06/03. I own and I am now waiting for the written judgment by post.
    Last week I saw in the London Gazette that my ex employer is calling a `Meetings of Creditors` on the 26/03.
    So, he is starting the liquidation process (LDT company) and I don’t have the judgment letter :(
    I know that he is using his solo trading company (same address), while he opens a new LDT. Furthermore, he has a offshore company that is providing `suspicious invoices` to ensure that no assets are left for the liquidation.

  7. Bill Short

    Took a company in Scotland to the Employment Tribunal and won.

    The company goes into administration and then is brought out with the same management team kept on and trades under the same number.

    Initially the administrator only pays out the 2 weeks insolvency pay (I believe that is what is was called).

    Now that the company continues to trade as nothing ever happened with the same management (different Directors) and same trading name can I claim the amount awarded to me?

  8. Tariq Raja

    I am taking my employers to employment tribunal but they wrote me that they are having a meeting on 15/04/2013 and let me know by the 19/04/2013 but I have been informed by my colleagues that company is sold and new company will take over on 15/04/2013. Can any one help me where I stand if my old company will not be there when my employment tribunal case will be on 02/05/2013.

  9. Sam

    I have entered into an ET with my previous employer but it doesn’t look good. I resigned on the 8th knowing the business wouldn’t last and was then told to work my notice at home, several other employees where then made redundant in this period, and we weren’t paid our salary at the end of that month as advised.
    I was actually treated really badly and lied to over this, having to take out a loan to pay my bills. I have started the ET and also started new employment and given a hearing date of the 7th. The 28 days came and went and I had heard nothing back, however my previous employer was evicted from their premises and went into administration on the 15th March. I had not been contacted by the insolvency officer as they didn’t know I was a creditor and now my employer has asked for an extension as they apparently didn’t get the letter. Insolvency officer has already said there is no money to pay anyone as the secured creditor will be paid first, my issue being I am still owed a considerable amount of commission I worked very hard for
    They have now set up another company with a new registered name, but using the same branding and website, employees and contracts from the dissolved company. I don’t believe they have any intention of paying the money owed but how can they get away with setting up a new company and almost choosing if they pay me or not. Shouldn’t they legally still have to pay me money owed. Any advice would be greatly received.

  10. Sam

    Hi,

    Looking for advice please. I agreed a sum of £8k for unfair dismissal with my former employer, however, when the time came to pay, nothing arrived. They then continued to ignore Charge Notices from us and 2 months after agreeing to the £8k, put the company into administration (also following the death of the MD / Owner).

    3 Former employees of the company who called themselves Directors, have now set up another firm.

    So, how do I find out if this is “pheonixing”? and am I worth pushing for the money I am owed?

    Any advice much appreciated, I do not have a solicitor!

    Thanks,

    Sam

  11. Terry Pearson

    Hi

    “4. Is it worthwhile submitting details of the claim to the company’s insolvency practitioner? On the basis of a recent High Court decision, such a claim would be provable in an employer’s insolvency ”

    Interesting! What was the case where the decision was made?

    Thanks for any help

  12. Alan LewisAlan Lewis

    Hi

    The case is Unite the Union and MCartney and others v Nortel Networks UK Limited (In administration) [2010] EWHC 826 (Ch)

    Regards Alan

    1. Terry Pearson

      Many thanks – I have some reading to do. If I win this you can bill me! If I do win, I will send you details, it should make interesting reading.

      Sincere thanks

      Terry

  13. Angie

    my husband was awarded £59k in a disability discrimination case, since then the ltd company has set up a phoenix company, sold the assets, chattels and goodwill to themselves and carried on trading whilst putting their old ltd company into insolvency. We have contacted the redundancy payment people and they have told us that my husband does not qualify for any payment under that scheme.
    is there anywhere else we can go or anything else we can do?

  14. Alan LewisAlan Lewis

    Angie

    I’m sorry to hear that you are having problems obtaining your husband’s disability discrimination award. It is difficult to advise you without knowing the full details of your husband’s case. However, your husband should contact the administrator/liquidator of his former employer and make sure he fills out a proof of debt form, attaching the Employment Tribunal judgement. He should also ask them to investigate the circumstances of the conduct of the director/s and/or report them to the Secretary of State. Your husband could argue that the sale of the assets to the company which is currently operating is a ‘transaction at an undervalue’ with the purpose of putting the assets beyond the reach of a creditor. In this case the director/s responsible for your husband’s losses (the £59k award) could be found to be personally liable for them. This can ultimately lead to disqualification of the individual concerned as directors or criminal prosecution if the business is continuing under the same name. However, in many circumstances a company will have already taken insolvency advice from an insolvency practitioner before placing the company into liquidation/administration. In such circumstances it may prove difficult to take any action to recover the award.

    Regards Alan.

  15. karen

    I was awarded compensation for constructive dismissal by tribunal judgement. I have the sheriffs office involved, but this week the company is going into liquidation, so the sheriffs are now not in a position to enforce my judgement and cease any assets.

    Yet in the background this publishers is setting up a new company to run the existing magazines so that clients etc are none the wiser. The new one will simply take over from the old company! This is the third time the director has done this in as many years and is simply a way of not paying debts and court orders (totally unfair!)

    Can i get the judgement transferred to the new company? as i can prove its been registered by the same director and will continue publishing the same magazines???

    Please advise – time is running out for me – they go into liquidation at the end of this week.

    I have also made the liquidators aware of his history and his new company set to take over…

  16. dean wilbourne-kay

    im taking my ex employer to tribunal in 3 weeks time but they are doing everything they can to avoid any remedy against them by trying to become insolvent and changing offices as well as moving assets to a phoenix company that they started on the same day they initiated the above all to get out of not having top pay out and accept liability i feel can i add them at this late stage as directors naming the 2 individually so as minimise any loss on my part as they have other directorships in 4 other companies together and they have personal assets that im sure would make them pay should any award be given ??????

    1. dean wilbourne-kay

      sorry forgot to mention this is a unfair dismissal on the grounds of whistle blowing and there is a very large schedule of loss been submitted

  17. Rachel Bowling

    I was sacked in Dec 2013 after 9 years , i have since started an ET for unfair dismissal . The company mad all the rest of the staff redundant in Jan 14 but then set up a another company using all the old companies computers and office equipment , how can this happen

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