Criminal proceedings brought by the Department for Business Innovation and Skills (BIS) against three ex-directors of City Link, under section 194 of the Trade Union and Labour Relations (Consolidation) Act 1992, who were alleged to have failed to give sufficient notice for redundancy plans, have collapsed.
Employers planning to dismiss 100 or more staff at one location must notify the Secretary of State 90 days in advance by filing for HR1. Failure to do so carries a potentially unlimited fine (it was up to £5,000 at the time).
City Link was placed into administration on 24 December 2014, resulting in the loss of over 2000 jobs. BIS prosecutors alleged that the firm’s former managing director, finance director and a non-executive director became aware that redundancies were inevitable on 22 December 2014, but the Secretary of State was not notified until 26 December 2014, when it was lodged by the company administrator.
During the hearing, it transpired that the company had received offers to purchase it, including one of £17 million. That meant there was a possibility the redundancies need not have occurred after all. The judge therefore ruled that there was no proposal on 22 December 2014 to make redundancies, and that the three defendants had every hope of saving City Link and its workforce by placing the company into administration. The three directors were consequently acquitted of the charge.
The judge in this case commented:
» “A director cannot be expected to put a crystal ball on his or her desk at a time of huge shock and turmoil, and predict the likely consequences of an action, unless a consequence is either the only foreseeable one or is the only consequence that can be reasonably envisaged.”
It is surprising that these comments actually depart from the statutory test for when the duty to lodge form HR1 is triggered. The obligation arises when redundancies are “proposed” – that is, when there is a plan that is likely to result in dismissal (e.g. entering administration) and it will be interesting to see if an appeal is filed.
These recent cases have been the first ever actions against directors for a failure to file form HR1. Although the directors have been acquitted in this particular instance, company officers should take care to avoid a court appearance by ensuring they file a properly completed form HR1 to BIS as soon as redundancies are proposed.
This article has been drafted on HR Legal Service’s behalf by Ward Hadaway Law Firm. Ward Hadaway Law Firm is one of HR Legal Service’s strategic legal advisory partners and provides certain services to our customers through a range of different Legal and HR support services offered by ourselves to the corporate market.
The content of this article does not constitute legal advice and it should not be relied upon. Specific legal advice may be required to address your specific circumstance.