Valentine’s Day administration gives Glasgow Rangers the blues.
With Glasgow Rangers Football Club going into administration, Jane Farrell – of our Employment department – looks at what ‘administration’ really means. Where do employees stand when a creditor puts the boot in?
Other than the fixation on Andre Villas-Boas’ future at Chelsea, probably the biggest football news in the UK recently has been Glasgow Rangers’ financial problems. Following legal action by HM Revenue and Customs (HMRC) against them for an allegedly unpaid £9 million tax bill, the club went into administration on 14th February. Not a happy Valentine’s Day for ‘Gers fans.
Administration is a procedure which is intended to allow companies to carry on as a going concern even though their debts outweigh their assets. It’s meant to give breathing space during which the company can explore different ways of continuing as a business. This is usually by finding more money to fund their activities, or selling all or part of the business to a new owner. During administration proceedings an administrator is appointed to run the business.
Administration is normally a very difficult and uncertain situation for employees. Although top-level footballers at Glasgow Rangers are unlikely to face unemployment, administration isn’t always successful in preserving jobs. Often it results in some, or all, employees being made redundant.
In a redundancy situation, it’s the administrator’s duty to comply with any legal responsibility to consult with employees about proposed redundancies. If there are 20 or more of these, the administrator must arrange consultation within a specified time with trade union representatives (where a union is recognised). Or, if there is no recognised union, with elected employee representatives. Failing to consult in that situation opens the company up to Employment Tribunal claims for a protective award for failure to consult.
Similar rules apply where the administrator is proposing to transfer the employees to a new buyer of the business. In that situation, the administrator will have to arrange for the appropriate representatives (either union or employee-elected) to be both informed and consulted on the transfer. A failure to do so also risks Employment Tribunal claims for compensation.
A company in administration often lacks funds to pay employees. However, employees can apply to a government fund called the National Insurance Fund for some types of payment owed by their employer. This includes:
- Up to 8 weeks of wages
- Up to 6 weeks of holiday pay
- Statutory notice pay
- Statutory redundancy payments
- Any basic award for unfair dismissal made by an Employment Tribunal
- Any protective award for failure to consult on redundancy made by an Employment Tribunal
- Any reasonable sum to reimburse a fee or premium paid by an apprentice.
But the first 6 payments are subject to a cap – currently £430 per week. So employees earning more than that won’t get their actual wage – they’ll get that maximum of £430 for each week of pay, redundancy, notice or holiday.
Which isn’t good news if you’re earning Scottish Premier League wages.