The Corporate Insolvency and Governance Act 2020

The Corporate Insolvency and Governance Act 2020

The Government implemented both temporary and permanent reforms to the UK insolvency regime in light of the COVID-19 (COVID) pandemic and resulting economic crisis. Significant changes were made by the Corporate Insolvency and Governance Act 2020 (CIGA) which aimed to ease the pressure on businesses under financial pressure and avoid mass insolvencies.
CIGA came into force on 25 June, following an accelerated parliamentary process.
The moratorium procedure
CIGA introduced a new standalone moratorium procedure with the intention of giving companies space from creditors to turn around their business and avoid insolvency. The moratorium covers an initial period of 20 days. This initial period can be extended without permission for another 20 days and can be further extended with the permission of pre-moratorium creditors or the court. The moratorium involves an insolvency practitioner monitoring the company’s directors, who remain in control.
Companies eligible to use the moratorium should have been:

  • Incorporated under the Companies Act 2006 or, if unregistered, would be wound up under the Insolvency Act 1986.
  • Unable to or likely to be unable to pay its debts in the opinion of the directors.
  • Rescuable as a going concern in the opinion of the insolvency practitioner.

Wrongful trading (temporary)
CIGA also temporarily lifted wrongful trading restrictions which would prevent a company from operating during an impending insolvency. Normally directors could be subjected to personal liability for continuing to trade in the face of an impending insolvency under Section 214 and Section 246ZB of the Insolvency Act 1986.
Restructuring Plan
CIGA inserted Part 26A into the Companies Act 2006 (Arrangements and Reconstructions for Companies in Financial Difficulties) which applies to companies liable to be wound up under the Insolvency Act 1986. This permits creditors with genuine economic interests from participating in the formulation of a restructuring plan and for the court to be able to sanction plans it considers to be just and equitable.
The “Ipso Facto” regime
CIGA made changes to the effect of Ipso Facto termination clauses; these automatically entitle a party to terminate a contract or automatically terminate a contract without any election being made in the event that a certain event occurs, for example, insolvency. Suppliers cannot end contracts for non-payment of pre-insolvency debts.
The effect of this regime is widespread and some provisions have been included to prevent unfairness to suppliers. For example, they are able to apply to the court to be exempt from the regime if it would cause undue hardship to continue to supply a business. If a company enters into a standalone moratorium, debt owed to the supplier during this period will be prioritised over other creditors. There are exceptions for ‘essential suppliers’ and ‘small suppliers’, which are dealt with under separate legislation.
Further developments
There were concerns that the Act was rushed without consideration to certain stakeholders. The Pensions Regulator, the Pension Protection Fund, and other retirement scheme representatives felt the changes may negatively impact pensioners, as the moratorium would prioritise debts falling during this period over beneficiaries of underfunded undefined pension schemes. However, some of these concerns were addressed while the Corporate Insolvency and Governance Bill was being debated and also by the Pension Protection Fund (Moratorium and Arrangements and Reconstructions for Companies in Financial Difficulty) Regulations 2020 (SI 2020/ 693) which came into force on 7 July 2020. There have also been concerns that that some creditors may be disadvantaged by the suspension of wrongful trading offences.
The temporary provisions will be phased out by the end of September and though the other changes are not subjected to time limits, however this may change in light of future developments.
For further information please contact Paul Cooper: paul.cooper@blaketurner.com or 020 7480 6655

Employment law updates – Coronavirus

Employment law updates: Coronavirus

Coronavirus Job Retention Scheme (CJRS) updates

Employment law updates – Coronavirus Redundancy payments:

  • The government announced on 30 July that workers who were furloughed will be entitled to a statutory redundancy payment based on their pre-furlough salary and not the reduced furlough salary. This was implemented by the Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020 which came into force on the 31st July.
  • Employees with more than 2 years of continuous service who have been made redundant are entitled to a redundancy payment up to a statutory maximum (which remains the same). This is based on age, length of service and salary.
  • The changes will also apply to Statutory Notice Pay and awards for unfair dismissal.

Furloughed workers:

  • Employers have been able to bring furloughed workers back to the office for any amount of time and for any kind of shift pattern since 1 July while still being able to claim the CJRS grant.
  • From 1 August the Government has advised that employers and employees should be able to exercise discretion as to whether they can work safely from the office.
  • The furlough scheme will end on 31 October 2020.

https://www.gov.uk/government/news/new-law-to-ensure-furloughed-employees-receive-full-redundancy-payments

https://www.gov.uk/government/publications/changes-to-the-coronavirus-job-retention-scheme/changes-to-the-coronavirus-job-retention-scheme

https://www.gov.uk/government/speeches/pm-statement-on-coronavirus-17-july-2020

For employment law advice please contact Rupert Farr: Rupert.Farr@blaketurner.com or 020 7480 6655.

FAREWELL TO THE “SMASH AND GRAB”

FAREWELL TO THE “SMASH AND GRAB”

For those participants in the Construction Industry who have been living in a cave for the last 20 years, it may come as a surprise that legislation which took effect in 1998 and 2011 introduced a new payment regime with concepts such as “withholding notices” and “payless notices”.

The regime imposed stringent obligations on paying parties to issue within short periods of time after receipt of invoices a notification setting out any sum which was not to be paid and specifying the reasons why.

Many employers and main contractors have continued to be caught out by this payment regime with main contractors and subcontractors taking advantage of any default by the paying party to issue adjudication notices requiring payment due to the absence of the requisite notifications. The Technology and Construction Court have reviewed this previously and come to the conclusion that failure to issue the correct notice is in effect strict liability to make payment.

His Honour Judge Peter Coulson in the recent case of Grove Developments has taken a different stance. He is unable to support the opinion of previous colleagues and has given binding authority that the absence of a payment notice is not fatal and a paying party will be entitled to commence a counter-adjudication seeking a “true value” of the invoice or account in question.

This is not a time for complacency and employers and main contractors must continue to comply with the payment regime.

However, in the event of default this case does allow a paying party to at least issue a counter-adjudication to nullify the effect of the inevitable decision of any first adjudicator being asked to order payment for failure to comply.

To discuss this or any other construction law issues please contact Blake Turner at info@blaketurner.com or on 020 7952 6214.

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How to correctly conclude a claim by way of a consent order

How to correctly conclude a claim by way of a consent order

In the matter Spice and Anor –v- Tuli and Anor [2012] which was heard in the Court of Appeal, the Defendant appealed the decision that the Claimant was allowed to bring a claim by way of a consent order based on the same set of facts as a claim which they agreed to dismiss.

The case discusses the use of the words “withdrawn”, “dismissed” and “discontinued” when concluding cases by way of consent. The word “withdrawn” is not appropriate as there is no provision in the CPR for a claim to be withdrawn, only discontinued or dismissed.

Facts

Spicer and Anor originally bought proceedings for possession. The day before the final hearing the Defendant provided disclosure. As the Claimant needed more time to investigate this disclosure they agreed a Consent Order dismissing the proceedings. In agreeing the consent order the Claimant’s Solicitor made it clear they would be investigating the disclosure and its validity.

Two months after the Order was filed the Claimant filed new proceedings, including the original claim for possession. The Defendant sought to strike out the claim on the basis that the claim for possession was barred as a result of cause of action estoppel. In addition, they argued that the fresh action was an abuse of process.

The application was unsuccessful and the Claimant was allowed to bring the second claim. The Defendant appealed the decision.

Decision

At the appeal it was concluded that there was no abuse of process. First, it was in the public interest that the disclosure was investigated for validity and secondly that the Claimant’s Solicitors had made it clear they would not stop the investigation just because the claim had been dismissed by way of consent.

The Court of Appeal considered the principle of cause of action estoppel. Whilst the principle of estoppel relies on the principle that there is finality of litigation it was created as “judge-made law”. As Judges often avoid setting absolute limits to any rule the Court of Appeal could understand why, in previous cases, the principle had been applied with a degree of flexibility rather than using a rigid application.

The case of Ako v Rothschild Asset Management Limited [2002] was considered. This is an Employment Tribunal case in which Dyson LJ concluded that a withdrawal or judgment by consent invariably results in a cause of action or issue estoppel. It was concluded that if it is clear that a party withdrawing their claim is not intending to abandon it or any issue within it then they cannot be barred from raising the point in subsequent proceedings unless it would be an abuse of process.

Although the Ako case was an Employment Tribunal case, and therefore subject to different rules than the Courts, Lewison LJ applied the case outside of Tribunal proceedings.
The appeal was dismissed and the Claimant was allowed to bring their second claim.

Comments

As a Claimant, care needs to be taken when signing consent orders. If there is an intention to bring the claim again in the future then proceedings need to be discontinued and not dismissed. In addition, it should be made clear to the Defendant’s Solicitors that there is an intention to bring future proceedings based on the same claim.

As a Defendant, before signing consent orders the Claimant’s intentions need to be clear. Defendant’s need to be aware of the implications in relation to the possibility of future proceedings against them.

IMPORTANT: This blog is only intended as a general statement of the law and no action should be taken in reliance on it without specific legal advice.

For further information on this please contact [ ] on: [ ] or [ ].

The ruling in Tyco and an Employees Travel Time to Work

The ruling in Tyco and an Employees Travel Time to Work

The recent ruling by the ECJ in the case of Federación de Servicios Privados del Sindicato Comisiones Obreras v Tyco Integrated Security SL and Tyco Integrated Fire & Security Corporation Servicios SA (Case C-266/14) [2015] All ER (D) 55 (Sep) determined that the employees travel time to work count as part of their working hours. This decision will likely affect those who provide employees for client visits and is estimated to affect up to 1 million companies in the UK alone.

The ECJ considered where an employee travelled for their employment that this would form part of their ‘working time’. This was on the basis the employees were working by travelling to and from their jobs as part of their employment. Further, during this time the employees were at the employer’s disposal and these journeys were solely for the employee to carry out their duties required by their employment.

UK Employers will need to consider, where they employ employees with no fixed or habitual place of work, what changes need to be made in order to comply with Tyco. Most UK employers do not currently include journeys by mobile workers as part of their working hours. Accordingly, careful consideration will need to be made to ensure EU Working Time Directive on an employee’s maximum work hours of 48 hours per week is not breached.

Employers will need to consider if their employees are affected by Tyco and may have to seek to negotiate opt-outs with those employees who will exceed the 48 hour threshold. Employers should also consider whether appointments can be allocated in a way that allows an employee’s first and last appointments to be located close to their homes. Employers will also need to monitor affected employees to ensure their travel time is being solely used for employment purposes.

Read more blogs from Blake-Turner Solicitors.

Zero Hour Contracts and Unfair Dismissal

Zero Hour Contracts and Unfair Dismissal

On 11 January 2016, the Exclusivity Terms in Zero Hour Contracts (Redress) Regulations 2015 came into force.

In May 2015, exclusivity clauses were rendered unenforceable under the Small Business, Enterprise and Employment Act 2015; however there was little opportunity for an employee to enforce the ban against their employers.

Under the new legislation, a zero hour contract worker can now bring a claim for unfair dismissal where the reason for the dismissal is due to the worker breaching a contractual clause, prohibiting him from working for another employer. Additionally, a worker who has suffered detriment, as a result of their breach of the exclusivity clause, will now have the right to bring an action against their employer.

Employers and zero hour contract workers should be aware that, unlike other unfair dismissal claims; there is no qualifying period for a worker to be able to bring this claim.

For further information on this or any other employment related matter please contact Rupert Farr on: 020 7952 6216 or rupert.farr@blaketurner.com.

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Personal Communications at work. Private or not? Bărbulescu v. Romania.

Personal Communications at work. Private or not? Bărbulescu v. Romania

The recent ruling, by the ECHR, in Bărbulescu v. Romania, confirmed there was no violation of an employee’s Article 8 human right to privacy, where the employee had used his company’s internet for personal communications uses during work hours, and was consequently dismissed.

Mr Bărbulescu was employed by a private company who had directed him to use Yahoo messenger as a means to liaise with clients. Mr Bărbulescu used the account for personal messaging including discussing his health and sex life. This constitutes a breach of his employment contract and as a result he was dismissed. Mr Bărbulescu proceeded to bring a claim against his employer for a breach of his Convention rights to privacy. Mr Bărbulescu considered that the Romanian courts should have excluded all evidence of his personal communications on the basis they were, by their very nature, private.

The ECHR considered that whilst the employee’s Article 8 rights to privacy were engaged the Romanian courts has struck a fair balance between his rights and the interests of the employer. The ECHR considered in accessing the data from Mr Bărbulescu’s work messenger account was not unreasonable, especially given the original access was on the basis it contained professional communications only. Further, the ECHR considered it reasonable for an employer to verify an employee was undertaking the work required within work hours.

Whilst this ruling does not give an employer an automatic right to monitor an employee’s personal communications, employees will no doubt be aware that private communications via work channels cannot be expected to be completely private.

IMPORTANT: This blog is only intended as a general statement of the law and no action should be taken in reliance on it without specific legal advice.

For further information on this or any other employment related matter, please contact Rupert Farr on: 020 7952 6216 or rupert.farr@blaketurner.com.

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Holiday Pay and Commission Payments

Holiday Pay and Commission Payments

The awaited decision in British Gas Trading Limited v Mr Z J Lock & Secretary of State for Business, Innovation and Skills UKEAT/0189/15/BA has been handed down.

Facts

Mr Lock was an energy trader and earned commission on sales as part of his remuneration package. Upon taking annual leave Mr Lock received his basic salary and any commission on previous sales however as he was unable to create new sales during his leave he did not receive commission.

Mr Lock brought claim on the basis he had suffered an unlawful deduction from his wages. He argued holiday pay should reflect the income a worker should normally receive had he been working.

The tribunal referred the case to the ECJ, who held commission payments must be taken into account when calculating holiday pay under the EU Working Time Directive.

Decision

The decision, by the EAT, confirms that the Working Time Regulations 1998 can be interpreted to include commission payments in the calculation of holiday pay in accordance with the four weeks annual leave set out in Regulation 13. The EAT considered this interpretation was compatible with the Directive.

Employers will now need to consider, where employees are remunerated based on commission payments, that any holiday pay that excludes commission payments will be considered an unlawful deduction and may give rise to an employment claim.

IMPORTANT: This blog is only intended as a general statement of the law and no action should be taken in reliance on it without specific legal advice.

For further information on this or any other employment related matters please contact Rupert Farr on: 020 7952 6216 or rupert.farr@blaketurner.com.

Read more blogs from Blake-Turner Solicitors.

TUPE: Temporary Cessation of Work

TUPE: Temporary Cessation of Work

The decision in Mustafa & Another v Trek Highways Services Limited & Others has confirmed that a temporary cessation of work does not preclude a TUPE business transfer or service provision change.

Facts

Trek Highways Services Limited was the sub-contractor for traffic management in regards to road maintenance services by Amey Services. In March 2013 a dispute arose between Amey and Trek and as a result Trek suspended operations and the staff were sent home. Upon settlement of this dispute Trek’s sub-contract was terminated and its employees transferred to Amey.

Upon reporting for work at Amey’s premises they were turned away by the new sub-contractor, Ringway. It was Ringway’s position that as there had been a termination of the sub-contract between Amey and Trek and accordingly TUPE did not apply.

The Decision

The decision by the Employment Tribunal upheld Ringway’s position and determined there had not been a relevant transfer or subsequent business transfer. The Employment Tribunal also concluded that the claimants were not employed immediately before the transfer date and therefore the conditions for a transfer had not been met. The Claimant appealed to the EAT who found that the activity in the sub-contract between Amey and Trek had not ceased and instead it has been suspended.

The EAT confirmed there is not requirement for the grouping of employees to be working immediately before the service provision change in order to be an organised grouping.

Employers will need to be cautious in placing too much reliance on a temporary cessation. Temporary cessation should only be one factor taken into account in determining whether there was a relevant transfer.

IMPORTANT: This blog is only intended as a general statement of the law and no action should be taken in reliance on it without specific legal advice.

For further information on this or any other employment related matters please contact Rupert Farr on: 020 7952 6216 or rupert.farr@blaketurner.com.

Read more blogs from Blake-Turner Solicitors.

Duvet Days – A dishonest and fundamental breach

Duvet Days – A dishonest and fundamental breach

April 12, 2016

The recent ruling in Metroline West –v- Ajaj [UKEAT/0185/15/RN] has confirmed that where an employee “pulls a sickie” this amounts to a dishonest and fundamental breach of the employment contract.

Read more blogs from Blake-Turner Solicitors.