14th January 2016
Two experts to consider employee protections and interface between company and employment law
Company Law Review Group to review law and recommend ways to ensure better safeguards for employees and unsecured creditors
The Minister for Jobs Enterprise and Innovation Richard Bruton TD and the Minister for Business and Employment Ged Nash TD have announced a twin track examination of protections in law for employees and unsecured creditors, particularly to ensure limited liability or restructuring are not used to avoid a company’s obligations to its employees and unsecured creditors.
The ministers have appointed two experts to examine the legal protections for workers, particularly where operations and assets may be moved to separate legal entities as part of a restructuring. This examination will specifically look at situations where valuable assets in a company are separated from the operating entity, and how the position of employees can be better protected in such situations. There have been several high profile cases of in recent years, most notably the closure of Clerys. In such cases, employees can be left without redundancy packages from their employers and instead have to rely on the State’s Social Insurance Fund.
In relation to Clerys, the Tánaiste and Minister for Social Protection is considering a range of legal avenues to vindicate the State and taxpayers’ rights, and as a first step, her Department secured a place on the committee of inspection working with the liquidators and other committee members in the execution of the liquidation process. It is important to note that the law in this area has been tightened in recent years through the Companies Act 2014.
Kevin Duffy, chairperson of the Labour Court and Nessa Cahill BL a company law specialist, have been given 8 weeks to examine existing legislation and to also consider new solutions on how to best protect the interests of workers in such cases.
While there may be many reasons why a company would separate its assets from its operations, if the operations entity then goes into liquidation this can have serious adverse effects on its employees.
As part of the process, Minister Bruton has separately requested that the Company Law Review Group to examine legislation with a view to recommending ways company law could be amended to better safeguard employees and creditors.
Minister Bruton said: “The treatment of the Clerys workers was appalling. As I said to the workers and their representatives on a number of occasions, there was a terrible lack of respect shown to people who were suddenly losing their jobs after years of service.
“Clerys and a number of other recent cases have shown up the potential consequences that can flow – to workers, to taxpayers, to suppliers and other creditors – from the exploitation of the interface between company law and employment law in such a way as to create consequences that were never intended by these carefully constructed systems of law. While we must be careful not to take rushed steps that might create bad law and further unintended consequences, I believe we have enough information now from the Clerys liquidation to proceed to the next step which we are announcing today. I look forward to receiving the advices of these experts as to what are the appropriate next steps that we can take to best protect against a situation like this arising again”.
Minister Nash said: ““The overnight closure of Clerys came as a shock to everyone, not least to the 460 workers who lost their jobs at the iconic department store. But, what was deeply disturbing was the callous treatment of these workers, some of whom had dedicated a lifetime to Clerys. They were left high and dry by the owners and it was up to the State, to taxpayers, to fund their statutory redundancy payments.”
“I believe most Irish people were deeply disturbed by this conduct – predatory capitalism at its very worst. While employment law and company law have been devised for different purposes, I believe that we must now examine what changes could be made to the two codes or at the interface of these two codes to better protect employees.”
Mr Duffy and Ms Cahill are being asked to examine how employees’ interests can be protected in situations where assets are separated from operations. They are to specifically consider:
- Could more effective use be made of current legislation to safeguard employees’ interests?
- At what point in time could any new measures to protect employees’ interests be triggered?
- Are there changes to employment rights legislation that could be considered, or changes at the interface of employment law and company law, including powers to set aside transfers of assets and time periods for same?
- What solution/framework of measures is required?
The experts will report by the 11th March 2016.
The Company Law Review Group is to explore:
- Instances where the corporate veil should be lifted
- The strengthening of Directors’ Duties to employees
- Checks and balances to strengthen obligations to employees for better protection in company restructuring
- Circumstances in a liquidation of an insolvent company where company liabilities can be met from solvent companies in the same group or in related companies.
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