Kate McGough: How does Carillion’s situation impact employment law?

Kate-McGough

In January 2018, various Carillion organisations went into liquidation, putting at risk around 20,000 jobs in the UK.

In a normal liquidation, the impact on the organisation’s employees is quite drastic. The organisation stops trading straight away and its employees are automatically redundant at the same time. If the organisation cannot pay employees’ statutory redundancy pay, employees can claim this from a government fund by applying to the Insolvency Service. What is more, if parts of the liquidated organisation’s business are sold or if any of its contracts are taken over by a different contractor, the buyer or new contractor does not have to take on the liquidated organisation’s employees because most of the rules on the automatic transfer of employment, the TUPE regulations, do not normally apply on a liquidation.

One of the many challenges posed by the Carillion liquidation is that the impact on many of its employees is not yet clear. Sections of the Carillion business have continued to trade because they are providing vital public services, and so many Carillion employees have carried on working. This is relatively unchartered territory for employment law, and so it is not clear whether the redundancy and TUPE rules on a normal liquidation will apply.

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Nevertheless, it is hoped that organisations which eventually take over the Carillion public sector contracts will rescue a number of Carillion employees’ jobs. Unfortunately, the same cannot be said for people employed by Carillion sub-contractors who are at risk of redundancy because their employers are owed significant sums by Carillion. Employees in that situation are less likely to move to organisations who take over Carillion contracts. If they are made redundant, they will be entitled to statutory redundancy pay, notice pay, and pay in lieu of any accrued holiday on termination.

Kate McGough is legal director at Addleshaw Goddard