Lawyer Monthly Magazine - November 2019 Edition

COPING WITH A COLLAPSE: EMPLOYEES’ RIGHTS DURING AN INSOLVENCY When things come crashing down for companies, employees are usually an afterthought. Take the demise of Toys R Us. The company went to battle with their ex-staff right after their collapse after laying off employees without any benefits or severance pay and, of course, they had to cough up. This leaves us with an all important question: what are employee rights when a company collapses? Thomas Cook’s high-profile collapse last month was a reminder of the importance of employees knowing their rights in a company insolvency scenario. Speaking to Michael Hibbs, Partner in the Employment team at  Shakespeare Martineau , he shares: “Acting quickly and keeping up communication with registered insolvency practitioners can improve workers’ chances of making successful employment claims.” So how can they discover exactly what they’re entitled to and what should they do to help the process run smoothly? With recent headlines being dominated by the financial struggles of well-known brands, a key area of confusion is the difference between the various types of insolvency procedures, and their implications for a business’ workforce. Michael expands on this: “For example, company voluntary arrangements (CVAs), which have attracted attention due to the tough trading conditions facing the retail sector, often enable an organisation to remain running while property rents are renegotiated with landlords. As such, they may not have a significant impact on employees, who will generally carry on working as normal.” On the other hand, in a compulsory liquidation, like that undertaken at Thomas With the rise of e-commerce, it is no secret that things are now a little uncertain on the high street. Just in recent months we have seen the much-loved US fashion store Forever 21 announce their struggle, resulting in shops outside the US closing, we are witnessing British retailer Mothercare preparing for the worst, and have also waved goodbye to the long lived travel group Thomas Cook that provide millions with irreplaceable memories – perhaps the one that hit us, Britons especially, the most.