Insolvency: Temporary Scheme for Compensatory Payment – Extension.

STATES OF JERSEY

INSOLVENCY: TEMPORARY SCHEME FOR COMPENSATORY PAYMENT – EXTENSION

Lodged au Greffe on 12th May 2009 by Deputy G.P. Southern of St. Helier

STATES GREFFE

2009   Price code: A  P.67

PROPOSITION

THE STATES are asked to decide whether they are of opinion

1. to refer to their Act dated 25th March 2009 in which they requested the Minister for Social Security to establish an easily accessible and well-publicised  system  within  the  Social  Security  Department  to deliver  payments  on  a  similar  basis  to all  Jersey  workers  made redundant by insolvency from 4th February 2009, and to maintain this system of payments until an Insolvency Scheme was in place; and
2. to request the Minister to extend the scheme (details of which were presented to the States by the Minister on 29th April 2009) to enable the Minister, in consultation with the Viscount, to use discretion to make payments to workers who have been made redundant without the  payment  of  statutory  notice  by  businesses  that  have  stopped trading even if the businesses have not yet been declared insolvent.

DEPUTY G.P. SOUTHERN OF ST. HELIER

REPORT

When the Assembly endorsed my propositions P.9/2009 and P.34/2009 to enable workers made redundant through insolvency to receive support through payments in lieu of statutory notice, the Social Security Minister reacted with commendable speed in bringing forward his temporary scheme outlined in R.44/2009 and presented to the States on 29th April 2009.

One  of  the  major  factors  that  influenced  members,  I  believe,  was  the  need  for immediate support to be made available. Members recognised that, in the absence of redundancy payments in Jersey, the complexities involved in ex-employees seeking compensation through a court or tribunal process which might take months would be unsatisfactory.

In P.34/2009, the report stated this principle clearly.

It was clear to many in the Assembly that the vote in favour of P.9/2009 (Woolworths employees: payment of statutory notice periods), was based on 2 factors –

1. that redundancies through insolvency were occurring;
2. that financial support was required to compensate those made redundant in a timely manner.

The Minister's Report R.44/2009 also reinforced this issue –

"Time  has  been  of  the  essence  in  drawing  up  this  temporary  insolvency scheme,  which  is  designed  to  pay  compensatory  statutory  notice  pay  to employees where their employer is insolvent."

"As well as avoiding unnecessary delay, another priority has been to design a scheme that is easily accessible to those submitting a claim and that pays out relatively quickly to those who qualify."

"To incentivise people to return to work as swiftly as possible, all those who qualify will receive up to 4 weeks of any compensatory notice pay entitlement – with no reductions. This removes any disincentive to find work quickly."

"Prompt  payment  is  another  key  aspect  of  this  scheme.  In  the  UK,  any payment in lieu of notice is only made after the end of the notice period (up to 12 weeks) when any earnings during that period have been established. Under this temporary scheme, eligible employees will not have to wait unduly for their notice payment."

In theory then, the temporary scheme should be able to provide timely and prompt assistance to employees made redundant as it was designed to do. However, in the case of Collas & Le Sueur Ltd., whose employees were made redundant 5 weeks ago, no payments have yet been made.

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P.67/2009

It seems fairly clear that the company has ceased trading and will not recommence trading in the future, and yet formal insolvency proceedings have yet to be set in motion.  My  understanding  of  the  insolvency  process  is  that  the  directors  of  the company must seek an orderly winding up or en désastre' ruling from the court in order to resolve their debt problems with creditors. This requires the directors to make some effort to make an inventory of its assets and debts before going to court. This often may take some considerable time. If creditors were to seek the winding up of the company through the courts there is a charge or indemnity to be paid towards the court and Viscount's costs. This makes many creditors reluctant to start proceedings. In either case, the process can remain stalled for some time.

It appears that the scheme devised by the minister of Social Security has failed in its first test to deliver what the States has requested. This proposition is designed to give the  minister  a  degree  of  flexibility  to  enable  him  to  properly  support  redundant workers  with  payments  in  lieu  of  notice  in  a  timely  manner,  whilst  insolvency proceedings are resolved.

Financial and manpower implications

There are no calculable additional financial and manpower implications.