Employees’ position when a company goes into administration
The recent administration of the Jamie Oliver Restaurant Group Limited and other associated companies will lead sadly to 1,000 jobs being lost.
The administration of any business raises significant concerns for employees who may find themselves at risk of redundancy and/or unable to recover sums due to them from their employer.
In the case of an administration (rather than a compulsory or creditors’ voluntary liquidation where the legal position may be different), the appointment of an administrator does not automatically terminate a contract of employment.
In some cases, the administrator may decide to carry on the insolvent business. In the case of the Jamie Oliver Restaurant Group Limited, it is understood that approximately three restaurants will remain open and a small minority of employees will be retained whilst the administrators consider their options. If the contracts of employment are not terminated within 14 days, the administrators will have ‘adopted’ the contracts of employment. The provision of 14 days is intended to provide the administrators with opportunity to familiarise themselves with the business and decide which employees the business needs and can afford.
Unfortunately, the majority of employees will be made redundant.
The employees will be keen to ensure that they are paid any monies owed including unpaid wages, notice pay, statutory redundancy payments and/or damages for breach of contract. However, any monies owed to employees will be the liability of the Jamie Oliver Restaurant Group Limited and not the administrator personally and, therefore, there may be insufficient funds within the administration to pay the employees any monies due to them.
Whilst the majority of debts owed to employees will be unsecured, employees who are owed remuneration (up to a capped amount), may be classed as preferential creditors and rank in priority after secured creditors and expenses of the insolvent estate have been paid. This means that, if there are any surplus funds after the secured creditors and any expenses of the administration have been paid, these will be paid to the employees in priority to any unsecured creditors.
Furthermore, the National Insurance Fund guarantees a basic minimum payment of certain debts owed to employees provided certain conditions are met. The National Insurance Fund will guarantee an employee’s arrears of pay (which is subject to a cap) and statutory notice pay. In order to qualify for a payment under the National Insurance Fund, a number of conditions need to be met and the employee’s employment must have been terminated by the administrators. Unfortunately, only claims from employees will be accepted and self-employed individuals are not entitled to payments under the National Insurance Fund.
If you have been affected by the administration of the Jamie Oliver Restaurant Group Limited and/or any other administration, and require advice on your employment rights, please contact Ruth Ball or James Johnson at Smith Partnership Solicitors.