McCay Legal are delighted to have secured Protective Awards for 26 former staff members of TMC Gas in the case of Lowry & Others v The Administrators of TMC Gas Services Limited. In linked cases, they also secured Unfair Dismissal Basic Awards for claimants.

On 9 June 2022, TMC Gas Services Ltd immediately ceased trading. Administrators were appointed, and all staff were made redundant upon reporting for work that morning. Prior to administration, staff had been unaware that administration was imminent and had not been consulted about any potential redundancies.

What are employees entitled to when their employer is insolvent?

Employees of an insolvent employer can claim from the National Insurance Fund and are entitled to receive:

(i) Statutory Redundancy Pay and/or Basic Award for Unfair Dismissal;

(ii) Arrears of Pay (subject to an 8-week cap);

(iii) Statutory Notice Pay (subject to a cap on weekly pay);

(iv) Accrued but untaken holiday (subject to a 6-week cap).

As part of the arrears of pay, an employee may be entitled to claim a Protective Award if 20 or more employees are made redundant at an establishment.

What is a Protective Award?

When an employer proposes to make 20 or more employees at an establishment redundant within 90 days or less, it must complete a period of collective consultation with affected staff. Where an employer fails to adequately consult prior to redundancy, an employee can bring a claim to an Employment Tribunal seeking a Protective Award of up to 90 days’ pay.

How did this apply to Lowry?

In Lowry, TMC carried out no consultation at all prior to redundancy. Affected employees received their statutory redundancy pay, arrears of pay, notice pay, and holiday pay by submitting an RP1 form to the Insolvency Service. McCay Legal was instructed to submit claims to the Industrial Tribunal to recover Protective Awards for 26 claimants and Unfair Dismissal Basic Awards for a small number of claimants who did not have sufficient service to recover full statutory redundancy awards.

Why did the case go to a full hearing?

Quite often, cases arising from redundancy/insolvency are resolved without the involvement of law firms, as employees submit an RP1 form and receive payment. However, claims for Protective Awards and Unfair Dismissal require an ET1 claim form to be submitted to the Industrial Tribunal. Quite often, as in Lowry, the administrators do not participate in such litigation as any awards will usually come from the National Insurance Fund (NIF) rather than the insolvent company. The Tribunal therefore permitted the Department for the Economy to participate in the case as a Notice Party, given that it is ultimately responsible for any awards. The Department objected to the Protective Award, citing an “Establishment Defence.”

What is an Establishment Defence?

Protective Awards are only payable where 20 or more redundancies are made at an “Establishment.” Traditionally, this had been given a wide scope to include all employees of an insolvent company. However, the position changed following the decision arising from the administration of Woolworths, where it was successfully argued that each individual store was an Establishment. Therefore, any stores with fewer than 20 employees were not obliged to collectively consult, and claims for Protective Awards in those cases failed.

How did the Establishment Defence apply to Lowry?

The Department argued that since many of the claimants did not work at TMC’s base all day or every day, they were not employed at that Establishment. It was accepted that the plumbers and fitters who worked for TMC spent much of their time away from the Establishment, undertaking work at various customers’ premises. However, it was disputed that this meant they did not meet the Establishment test.

What did the Tribunal decide?

The Tribunal received witness statements from all claimants who undertook work at customers’ premises. All the claimants detailed how they were line-managed from TMC’s base, attended the base most mornings to get tools and materials, picked up their colleagues, and went there to book holidays or submit sickness certificates. They all wore TMC uniforms and drove TMC-branded vehicles. They undertook work for a range of different customers, and job durations varied. Some of the claimants attended the Tribunal and were cross-examined under oath.

Ultimately, the Industrial Tribunal, chaired by Employment Judge Sturgeon, held that all of our clients were entitled to the maximum 90 days’ Protective Award. The Tribunal found that the Department had provided no evidence to substantiate that the claimants were not engaged at the Establishment.

Commentary

McCay Legal Managing Director Gareth McCay had conduct of the case, assisted by Trainee Solicitor Kerri McGrory and Counsel Emma McIlveen BL. Mr. McCay commented:

“This is a case that should never have come before the Tribunal. Our clients’ position was comprehensively set out during the interlocutory process, and the Department did not produce a single document or witness to substantiate an Establishment Defence. This was recognized by the Tribunal in its decision. All the Department did was delay our clients’ access to justice for over a year and inflate both their own costs and our clients’ costs. Costs are rarely awarded in the Industrial Tribunal; however, we have taken the exceptional step of submitting a costs application, which will be dealt with in the coming months. We are delighted that our clients were finally able to access their legal entitlement, which they have all contributed towards via National Insurance contributions throughout their working lives. They can now put this matter behind them.”

If you have any employment law-related matters, get in touch with a member of the McCay Legal team today at: Tel: 02871 371705.