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What can retailers learn from Comet’s insolvency?


In 2011, Comet was bought by private equity group OpCapita for £2 but continued to struggle. The next year Deloitte was rushed in as administrators under a pre- pack rescue package. When Comet was liquidated nearly 7,000 employees were unfortunately made redundant. All of this is familiar territory for the retail sector, with Woolworths and Ethel Austin still fresh in the memory.

At the Leeds employment tribunal last month (June), 2,000 employees made claims for compensation arising from the failure by Comet and Deloitte to properly consult with staff regarding upcoming redundancies. The claims were upheld due to a lack of consultation.

Andrew Fishleigh, consultant solicitor at Keystone Law comments: “In large scale redundancies as with Comet, if 100 or more redundancies at any one establishment are proposed in a period of 90 days or less, the consultation should have commenced 90 days before the first dismissal took place. That time frame has now been reduced to 45 days.

“It is important to note that consultation must be a genuine exercise and not a sham, which involves giving representatives reasonable time to consider proposals being made and allowing the employees’ views to be aired,” he says.

How can retailers be stung?

“If an employer fails to comply with any of the statutory consultation requirements a complaint to an Employment Tribunal can lead to a ‘protective award’ being made,” warns Fishleigh. “The amount awarded depends on the circumstances, including the seriousness of the employer’s default but can be as high as 90 days’ actual pay.”

The insolvency position

If the employer cannot pay up due to liquidation or administration, special rules operate to allow affected employees to claim via the National Insurance Fund, but claims are capped at 8 weeks’ pay and the current weekly pay limit is £464. So the Comet employees who were awarded 90 days’ pay will in fact recover 56 days’ pay – but the overall bill for the government could reach £25m if all employees claimed.

What can be done?

Ensure that if there is no Trade Union in place you have appointed employee representatives in place to enable fair consultation to commence at an early stage. Take all steps possible to allow exchange of information and views as that will reduce any award made by a Tribunal.

The future

The government have recognised that the demise of Comet and other retail giants means lessons have to be learnt and are therefore reviewing the whole insolvency process and pre-pack rescues.

Published on Wednesday 16 July by Editorial Assistant
Tags: Comet

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