Posted: Friday, 4 January 2019 @ 13:43
So, HMV is heading towards insolvency and is appointing an administrator.
This is sad for many of us, as we were brought up on the HMV brand.
Like so many others, I have fond memories as a teenager going to HMV in Piccadilly and browsing and buying CDs (or its equivalent) and videos and latterly DVDs. No matter, irrespective of the attachment to the brand, it seems that HMV is victim to its inability to adapt to changing times and the continued power of the internet with its downward pressure on price. Frankly, this is not too relevant for the 4,350 odd staff that faces an uncertain future.
The question perhaps for them, are what are their legal options as administrators bid to do what they see is best for the company?
The Objective of Administration is Positive
It is perhaps important to recognise that whilst the process is extreme, administration is designed to retain the business as a going concern, so that those who are owed money can be paid and the business can remain viable.
The Reality Means Staff Will Go
It remains unlikely that HMV will remain fully intact and just look around, employees are very often amongst the first casualties in an insolvency type situation. You only have to look at the position with Jessops who have announced all staff will go with 1,300 job losses. Generally, in an effort to streamline a business and prepare it for sale, the administrator will be looking carefully at how to reduce overheads and that could well result in terminations.
The Next 14 Days are Critical
During the 14 day period if dismissal occurs, employees fall much further back in the creditor's queue and could end up with little or nothing. So it is in the administrator's interests to speedily eliminate any costs or liabilities that they feel the business can do without in the short term. After that period is finished, any wages or other remuneration accrued but unpaid have a greater chance of being as the employees become what is known as "preferential creditors".
Therefore, despite the risks of not being paid, staff should still go into work.
Staff can claim for all your outstanding pay from the insolvency practitioner. There is no guarantee that the full amount they are owed will be paid as this depends on whether enough funds are raised from the sale of the employer's assets.
Some debts, including holiday pay and wages, will be 'preferential debt' when your employer's assets are shared out. This means they must be paid before certain other debts.
If there are still monies due to staff, as a back -up, employees can still make claims to the National Insurance Guarantee Fund.
These claims are for:
•redundancy
•wages - up to a maximum of eight weeks
•holiday pay - up to a maximum of six weeks
•compensatory notice pay - one week after one calendar month's service rising to one week per year of service up to a maximum of 12 weeks (new earnings will be taken into account)
There is a limit of £430 a week on the amount they can claim for weekly pay.
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If Employees Still Survive There is Some Hope
For those that do survive the initial period and find themselves being transferred across to a new employer, there is hope. Terms and conditions of employment will generally be protected as a consequence of the Transfer of Undertakings Regulations ("TUPE").
Nevertheless, it is possible that contracts may be varied to a degree, where an administrator feels that changes are necessary to safeguard the survival of the business. However this would not be standard TUPE transfer, which makes changes unlawful even if everyone agrees to them, "permitted variations" are possible in the more extreme circumstances of an administration.
So employees and their representatives may find themselves under some pressure to go along with changes.
If the business is sold to someone else, their employment rights are protected, including any pay that is owed to them.
Therefore perhaps the motto “Keep Calm and Carry on” is appropriate for this situation, at least for the next 14 days.
Justin Patten,Employment Lawyer