Redundancy payments: businesses which have ceased trading.

STATES OF JERSEY

REDUNDANCY PAYMENTS: BUSINESSES WHICH HAVE CEASED TRADING

Lodged au Greffe on 17th June 2014 by Deputy G.P. Southern of St. Helier

STATES GREFFE

2014   Price code: B  P.120

PROPOSITION

THE STATES are asked to decide whether they are of opinion

to request the Minister for Social Security to extend the insolvency scheme to enable the Minister, in consultation with the Viscount, if appropriate, 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

On 17th June 2009 the States voted by 41 votes to 1 to adopt P.67/2009: Insolvency: Temporary Scheme for Compensatory Payment – extension' as follows –

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 toextend 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.

In  my report on that proposition, I laid heavy emphasis on the need for prompt government action in response to redundancies thus:

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.

As I noted at the 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."

In that case there was a 5 week delay (at least) back in 2009. Today, 5 years later, despite  the  establishment  of  statutory  redundancy,  insolvency  scheme  and  an insolvency fund, we have a delay in getting payments to the employees of Just Glass & Windows of over 7 weeks.

The then Chief Minister, Senator T.A. Le Sueur , reflected the mood of the Assembly when he offered his support as follows –

"Members may have noticed that the Minister for Social Security and the Assistant Minister are both out of the Island and accordingly I am wearing another hat today as Minister for Social Security. In that context I am happy to confirm the acceptance of this proposition by the Minister and indeed to welcome  it  as  further  clarifying  the  desire  to  assist  those  employees  in resolving  as  swiftly  as  possible  the  concerns  and  difficulties  which  they undoubtedly will have in this situation."

"It is, as the proposer said, much a matter of exercising discretion sensibly and  in  an  informed  way  and  using  the  assistance  of  the  Viscount's Department in ensuring that that discretion is used wisely, as well as widely. Hopefully not too widely ... certainly wisely."

"There may be issues as Deputy Southern says, in being able to recover assets if the insolvency does not prove to be insolvency. But those I think are details which should not detract from the main intention here, which is that of helping employees in a position of difficulty."

"I  welcome  the  amendment  from   Deputy   Southern  and  confirm  that  the Minister for Social Security will exercise his discretion in an informed way pending the implementation of a proper redundancy scheme."

P.64/2011, which brought the Insolvency Benefit into existence, repeated the need for rapid reactions to the need for redundant employees to get support, when it stated in its opening  paragraph:  "The  intention  is  to  promptly  give  employees  some  financial security  by  providing  a  benefit  based  upon  a  reasonable  proportion  of  amounts owed."

There is no doubt that the insolvency/redundancy system set up is not capable of delivering such support in all cases in a prompt manner.

Financial and manpower implications

It is difficult to assess the extent to which this measure will involve further cost to the States. When insolvencies are finally resolved as a result of a lengthy process, there is often a return from the remaining assets to creditors, one of which may be the States, sometimes in its role of paying out redundancy payments when insolvency was first declared. In any case such payments are to come from the Insolvency Fund, which is largely funded from employer contributions. In the case that is currently before the States, that of the company Just Glass & Windows, where it is not certain whether the company which has ceased trading will be declared insolvent, the maximum cost to the States and/or the Fund would be the maximum payment allowed of £10,000 for each of the 8 employees concerned. I believe that this sum (£80,000) could come from within the existing Social Security budget.