Thames Valley: Blake Morgan outlines implications of BHS situation for employees

Katie James, an insolvency expert at Thames Valley law firm Blake Morgan, has outlined the implications for employees of the news that BHS is about to go into administration.

She said: “The news is devastating for the firm’s 11,000 employees, particularly when the high street has never faced a more challenging environment. We don’t have to look too far back to see the echoes of what happened at Woolworths around eight years ago. It is understood that the board has told the employees that they will be paid this month, but there is no guarantee about future pay.

“Administration is primarily aimed at business rescue, so it is not certain that any or all of the BHS stores will close, particularly if the administrators can find a buyer. However, this doesn’t help to alleviate the uncertainty faced by its staff."

As part of the process, the administrators will be liaising with representatives of the employees so that employees should look to those representatives and to the administrators for updates on the broad situation.

She added: "UK law requires that as well as consulting individually with staff, an employer must within 90 days consult collectively with trade unions or staff representatives where they propose to make 20 or more employees redundant at ‘one establishment’. Many of the BHS stores will have more than 20 staff and legally, if that number are to be made redundant, the consultation would have to start at least 30 days before the first dismissals (45 days if there are 100 or more staff to be dismissed at one ‘establishment’).

“In situations like this there is often little warning of redundancies and so claims that there has been a failure to carry out proper collective consultation with unions and staff representatives are common. An Employment Tribunal may award up to 90 days' pay per affected employee for a failure to consult collectively. It is easy to see how this can end up being a very large sum of money, which in the case of insolvent employers may be picked up by the state, subject to certain limits.

“Following the collapse of Woolworths, the trade union USDAW challenged the lack of collective consultation that took place in the smaller stores. Around 3,000 staff did not receive these 'protective awards' for failure to consult collectively because they worked in stores with less than 20 staff, where (the argument went) the collective consultation obligations did not apply. Each store was treated as a separate ‘establishment’ for collective-consultation purposes. The case went to the European Court of Justice but the ECJ confirmed that each establishment is to be considered separately, so that each store was its own ‘establishment’ for the purposes of the 20-plus threshold.

“If there are to be large-scale redundancies, this is likely to mean, however, that employees in very small branches of BHS, with less than 20 staff, would not have the benefit of a protective award if there were a failure to consult collectively."