HC 928 - Impact of the Closure of City Link on Employment

Book excerpt: There will always be those who lose out when a company goes into administration and cannot cover all of its debts. However, the current system does not represent the appropriate balance, since those who have given secure credit to a company are cushioned from the full impact of an insolvency, because the losses are borne by those who work for a company on a self-employed basis, or as contractors or suppliers. Under the current rules it is clearly in the financial interest of a company to break the law, and ignore the statutory redundancy consultation period, if the fine for doing so is less than the cost of continuing to trade, especially since this fine will anyway be paid by the taxpayer. However, while the financial calculation is simple, ignoring the consultation period has a high human cost that appears not to have featured in the decision making process at City Link. Employees were denied a reasonable notice period in which to seek alternative employment and instead, at a time of financial uncertainty, have to pursue a court claim for lack of consultation if they wish to be compensated. While there were differences of opinion as to whether or not City Link could be made viable, and the desired level of return could be achieved, the Committees regret that Better Capital felt its investors' interests could only be protected at the expense of the future of City Link and continued employment for its workers