News, Opinions and Resources

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.

Share Button

Tags: , , , , ,

29 Responses to “Can I pursue an Employment Tribunal Claim against an Insolvent Company?”

  1. Peter from leeds October 19, 2012 at 9:07 am #

    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 December 5, 2012 at 8:19 pm #

    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 January 14, 2013 at 7:59 pm #

    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 Lewis January 16, 2013 at 1:46 pm #

    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.

    • yvonne hope September 27, 2013 at 10:11 am #

      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 February 7, 2013 at 2:08 pm #

    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 March 21, 2013 at 12:06 pm #

    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 March 22, 2013 at 10:42 pm #

    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 April 11, 2013 at 12:28 pm #

    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 April 15, 2013 at 3:08 pm #

    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 April 15, 2013 at 10:42 pm #

    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. sharon weston May 17, 2013 at 11:07 am #

    Been to an employment tribunal and got a judgment for wages and holiday pay what do I do now

  12. Terry Pearson July 31, 2013 at 7:08 pm #

    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

  13. Alan Lewis August 1, 2013 at 10:20 am #

    Hi

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

    Regards Alan

    • Terry Pearson August 1, 2013 at 9:32 pm #

      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

  14. Angie January 11, 2014 at 10:31 am #

    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?

    • Alan Lewis January 15, 2014 at 10:32 am #

      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 February 5, 2014 at 10:33 am #

    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…

    • Alan Lewis May 29, 2014 at 4:06 pm #

      Unfortunately, you can only enforce an Employment Tribunal judgement against the Company (i.e. your former employer) that the Judgement Order has been made against. If the company against which judgment was obtained is a limited liability company, and the new company is also a limited liability company, they will be considered two separate legal entities and the judgment against the former company will not be enforceable against the newly formed company, even though the Directors of the old and new company are the same persons.

      However, there are sometimes circumstances where the conduct of the Directors of a company is suspicious, particularly when it could be argued that the sale of the assets to the newly formed company is a ‘transaction at an undervalue’ with the former company with the purpose of putting the assets beyond the reach of any creditors. If you suspect this may be the case, I would advise you report this to the insolvency practitioner and ask them to investigate the circumstances of the conduct of the directors and/or report them to the Secretary of State. This could ultimately result in disqualification and/or criminal prosecution of the Directors, as well as some financial redress for yourself.

      However, it is usually the case that the company will have already taken insolvency advice from an insolvency practitioner before placing the company into liquidation/administration. In such circumstances it may be unlikely to recover the award as unfair dismissal payments are classed as unsecured debts which rank last in the order of priority of an insolvent company’s debts. However, you should contact the insolvency practitioner and fill out a proof of debt form, attaching the Employment Tribunal judgement.

  16. dean wilbourne-kay February 7, 2014 at 10:34 am #

    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 ??????

  17. dean wilbourne-kay February 7, 2014 at 10:35 am #

    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

  18. john pashley February 11, 2014 at 10:37 am #

    The company I worked for went into administration I have hearing can I still claim for my hearing loss

  19. Rachel Bowling February 16, 2014 at 10:38 am #

    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

  20. Mark Brown May 15, 2014 at 1:06 pm #

    I was made redundant in January and the company whom I worked for for over 20 years entered administration. I put a ET claim for lack of consultation and have recently been given consent from the administrators – the company I worked for didn’t respond to the claim and the ET Judge have advised me that he/she will be making a judgement and not allowing ex employer to attend. Can you advise what I should expect to happen next and whether to expect anything to happen to my previous employer and any compensation for lack of consultation? The company I worked for was part of a group of companies of which the parent and sister companies are still trading with the same directors.

    • Alan Lewis May 29, 2014 at 4:09 pm #

      As you have the consent of the insolvency practitioner dealing with your former employers company administration, you can proceed with your Employment Tribunal claim in the usual way and obtain a Judgement against your former employer.

      Assuming the company is not rescued as a going concern as a result of the administration, and the formal insolvency process is commenced, once you have successfully obtained Judgement, you will need to claim an award as part of this insolvency process. The maximum sanction an Employment Tribunal can award against your former employer for breaching their obligation to consult in the redundancy process is a “protective award” of up to 90 days’ gross actual pay.

      Any protective award made in respect of the period prior to insolvency will be a ranked as a preferential debt in the insolvency process. Preferential debts rank equally among themselves after the payment of the expenses of the insolvency proceedings and fixed charges and/or mortgages, and in priority to floating charges and unsecured creditors of the company. However, your claim as a preferential creditor will be capped at £800 in accordance with insolvency rules if your claim arose after the date on which your employer entered administration.

      As you have already received consent from the insolvency practitioner, I assume they are already aware of your claim, so once you have obtained Judgement from the Employment Tribunal, you will need to contact them and advise them of this.

      You should have received the details of the insolvency practitioner (along with information about the insolvency process) directly from the insolvency practitioner at the time your employment formally entered the insolvency process, but in the event that you do not have their details, these can be obtained from Companies House.

  21. Jean Slack November 8, 2014 at 4:09 pm #

    Hi
    I need some advice I took my employer to an ET in August and the next day he voluntarily liquidated the company although my employer is still acting as a shadow director for the new company running the premises I have been given the basic award by the gov fund but there is still over £11000.0 outstanding from the award is there anything I can do .

    • Linder Myers Solicitors November 10, 2014 at 2:17 pm #

      Thank you for your query which has been sent to our employment team who will respond direct.

  22. Peter Acho November 14, 2014 at 3:40 pm #

    Hi,
    I worked for a company for 3 years but fell out of favour for questioning a practice where irrational behaviour or ASBOs were allowed to reign against the neighbours. To get rid of me I was falsely accused of stealing a property which was neither missing nor declared lost. A kangaroo investigation failed to establish unanimity of opinion but I was sacked nonetheles. I took the matter to ET for unfair dismissl but the company pleads insolvency and under administration. The names of the new and old company are the same. I pleaded with ET to proceed with the trial as indeed my name and reputation has been tarnished insisting that records held by them could be deemed valid and used against me in future. It is not really about compensation but my name. I’m hesitant to look for work until the matter is closed. What shall I do please to clear my name?

    • Linder Myers Solicitors November 17, 2014 at 1:50 pm #

      Hi Peter, your query has been passed to our employment team who will respond to you direct.

Leave a Reply

Privacy and Cookies:

This site uses session cookies to understand how you use and interact with our website.

If you continue through the website, these cookies will be set. To find out more or to remove these cookies please visit our privacy policy. Learn more

Close this message