Administrators and directors of ailing companies should be aware of the recent prosecutions being brought under section 194 of the TULR(C)A 1992.  Under the Act any company, proposing to dismiss as redundant 20 or more of its employees, commits an offence if it fails to notify the Secretary of State within a set amount of time before the dismissals take place (90 days, if 100 employees or more; 30 days, if 20 employees or more; see TULR(C)A 1992, section 193).  Administrators and directors of the company are also personally liable for prosecution if it can be shown that the offence was committed with their consent or connivance, or is attributable to their neglect (TULR(C)A 1992, section 194 (3)).

The liability of administrators and directors under the Act is certainly nothing new (the Act having been in force since October 1992), what is newsworthy is that the first prosecutions are starting to make their way through the courts.  The first was brought last year (BIS v Smith, Peto and Wright).  In that case Deputy District Judge David Goodman, sitting at the Coventry Magistrates Court, found the Defendants, directors of City Link, not guilty of the offence on the basis that there had never been a proposal to dismiss such as would trigger the obligation to notify under section 193 of the Act. 

The second set of prosecutions, ongoing, arises from the collapse of fashion retailer USC Limited, a subsidiary of Sports Direct International plc, and the controversial dismissal of 80 employees from USC’s warehouse in Dundonald, Ayreshire.   Charges have been brought against David Forsey, director of USC, and also against Robert Palmer, a compliance and technical partner at the Gallagher Partnership, joint administrators of USC.  Both have pleaded not guilty and culpability remains to be decided.

While the Department of Business Innovations and Skills has yet to secure a conviction, the recent willingness to pursue prosecutions is a matter to be noted by both administrators and directors alike and the final decision in latest prosecution is likely to be of great interest.

To read more on the background of the case of City Link please click here for The Guardian.

This article was written by No5 Chambers’ Barrister Imogen Halstead. Please click here to view Imogen’s profile.