employment", this did not include contributions paid to a pension provider on the employee's behalf.
TERMINATION PAYMENTS AND THE PENALTY CLAUSE
2 May 2013
The unenforceability of a penalty clause in a fixed term contract has been under the spot light in a recent case concerning a football club.
Thanks to Daniel Barnett’s Employment Law Bulletin for drawing our attention to this article.
Where termination of a fixed term contract was permitted provided the employer paid the employee’s salary for the unexpired portion of the term, was that arrangement an unenforceable penalty cause? Obviously not, holds HHJ Pelling QC in Henning Berg v Blackburn Rovers Football Club & Athletic PLC . The contract of employment between the Football Club and Mr Berg permitted early termination of his fixed term, but required the Club to pay Mr Berg his salary for the whole period if it chose to terminate early. It did so choose, and Mr Berg claimed that sum. Refusing the Club permission to withdraw its admission that the sum was due, the judge ruled that it was not arguable that the clause was an unenforceable penalty, because it was not a penalty for breach at all: it operated when the Club did something it was entitled under the contract to do.
TUPE CONSULTATION BY INSOLVENT COMPANIES
14 May 2013
Is it reasonable to expect an insolvent employer to continue to trade for 90 days, so that it can inform and consult in accordance with its obligations?
No, says the Employment Appeal Tribunal in AEI Cables v GMB . Daniel Barnett reports:
AEI, a manufacturer of copper wiring, had suffered financial difficulty as a result of a steep increase in the price of copper. It received advice from its accountants that, unless it reduced costs, there was a risk of the company trading whilst insolvent. The consequences of trading whilst insolvent are that the directors could incur personal liability for obligations assumed, and may also incur criminal liability for fraudulent trading. Following an unsuccessful request for an overdraft, the directors made 124 employees redundant with immediate effect. The workers successfully claimed in the Employment Tribunal that there had been a breach of the duty to consult under s.188 TULCRA. The employment tribunal made 90 day protective awards to each employee under s.189 TULRCA. On appeal to the EAT, the decision to make 90 day awards was overturned and 60 day awards were made instead. In explaining its decision, the EAT stressed that the purpose of making a protective award is penal, not compensatory. It is designed to encourage employers to comply with their obligation to consult. The ET was obliged to take into account mitigating factors, and should have asked the important question: “why did the respondent act as it did?” Had the ET asked this question, it would have seen that the company could not trade lawfully following the advice it received from its accountants. In those circumstances, it was wrong for the ET to anticipate that a 90 day consultation could have taken place.
On the basis that AEI’s failure to consult was complete, but that “some consultation could
CIPP Policy News Journal
16/04/2014, Page 103 of 519
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