What a week. Lehman Brothers gone, Merrill Lynch taken over by Bank of America, HBOS swallowed up by Lloyds-TSB and AIG bailed out by the US government. Now even Morgan Stanley and Goldman Sachs are said to be at risk. It’s a dreadful time to be an employee in financial services and whilst many people will be secretly enjoying seeing events unfold, it will affect all of us sooner or later when the recession bites. The TV news programmes have been full of Lehman Bros. employees walking away with their possessions in cardboard boxes and it isn’t a pretty sight.
What can be done when your employer goes bust? You can apply to the Redundancy Payment Office (RPO), part of the Insolvency Service, for a Redundancy payment (you’ll need two years’ service minimum and must apply to your employer or to an Employment Tribunal within six months of your employment ending) and for up to eight weeks’ unpaid wages. The RPO will also pay up to six weeks’ holiday pay and up to 12 weeks’ notice monies (depending on your length of service). Whilst this may seem quite generous at first, bear in mind that in each case a week’s money is capped at £330. HMRC will pay out Statutory Sick Pay, Maternity, Paternity and Adoption pay if entitlement continues after the date of the insolvency.
The best hope, of course, is that another company will come in and take over the failed business. Barclays is said to be circling the remnants of Lehmans looking for the best morsels. If it does take over parts of Lehmans it may be a TUPE transfer, meaning that certain safeguards will be put in place, although since the TUPE rules were overhauled in 2006 a lot more flexibility has been built into the situation where a new company takes over parts of an insolvent one. It is far too complicated to go into here bu, in brief, the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) provide that it is an automatically unfair dismissal to terminate a person’s employment for a reason connected with the transfer. The new company cannot simply dismiss all the old company’s staff because they are connected with the old business. It has to consult with all staff and it can only dismiss employees for an “economic, technical or organisational reason” – such as redundancy and has to be able to justify that decision if a complaint is made to an Employment Tribunal. Compensation for unfair dismissal is capped at £63,000 plus a basic award of £330 per week of service. TUPE transfers will be much more relevant in the Lloyds TSB – HBOS merger.
It looks like we’ll be seeing more of these situations over the next few weeks and months and I’ll try to cover as much as possible. If there are any questions you want answering, please contact me using the email address below.
This article will appear in the “Docklands” and “Pensinsula” newspaper week commencing 22nd Sept