Employment & Pensions Blog: Company Administrator not liable for failing to give notice of proposed redundancies

On 1 November, the Supreme Court issued its judgment in R (on the application of Palmer) v Northern Derbyshire Magistrates Court and Another.

Background 

Mr Palmer was appointed as one of the administrators of West Coat Capital Ltd (WCC), a clothing, footwear and accessories retailer that was part of the Sports Direct Group.  The following day, certain employees were handed a letter from Mr Palmer, stating that they were at risk of redundancy. Later that same day, the employees were handed a second letter, dismissing them with immediate effect by reason of redundancy. 

Sections 193(1) and 193(2) of the Trade Union and Labour Relations Consolidation Act 1992 (TULRCA) provide that where an employer proposes to dismiss at least 20 employees as redundant within a 90-day period, it is required to give notice of the same to the Secretary of State at least 30 days before any dismissal takes effect. Sections 193(1) and 193(3) also provide that any “director, manager, secretary or other similar officer of the body corporate” will be guilty of a criminal offence if the company fails to do so. 

In this case, WCC failed (amongst other things) to notify the Secretary of State of its intention to make the redundancies thus found in breach of certain provisions under TULRCA.

As a result, criminal proceedings were commenced against Mr Palmer on the basis that he was an ‘officer’ of WCC and should have complied with TULRCA. However, Palmer argued that he had not committed an offence because he was an administrator as opposed to an ‘officer’ of the company.  The Northern Derbyshire Magistrates Court rejected his argument. 

Mr Palmer applied for Judicial Review and his application was rejected by the Divisional Court which led Mr Palmer to seek permission to appeal in the Supreme Court.

The Supreme Court Judgment 

On appeal, in a unanimous decision, the Supreme Court held that an administrator of a company appointed under the Insolvency Act 1986 is not an ‘officer’ of the company for the purposes of section194(3) TURLCA. Thus, administrators cannot be held as criminally liable for a company’s failure to notify the Secretary of State of proposed collective redundancies. Therefore, Mr Palmer was held not to be criminally liable for WCC’s failure in this regard.

The Supreme Court stressed that what was meant by an ‘officer’ in the context of the provision in section 194 of TURLCA, was to be determined by asking whether that person held an office within the constitutional structure of the company/ body corporate, which was not the case here. 

Comment

Whilst this decision will be welcomed by administrators, they must still act with a certain level of caution as they are still bound by additional obligations including consulting with employee representatives in advance of redundancies. A balancing exercise of the risks and benefits must therefore still be carried out to minimise any liability on a company going into administration. The fact that a company has gone into administration does not obviate the need for compliance with their obligations under TULRCA.

If you have any questions about this case or a related issue, please reach out to a member of our Employment Team.