In the current climate, more and more Companies are going under owing employees money. In this case at the EAT, employees claimed against their employer who was in administration and the Tribunal refused to accept the claim.

The EAT held that this was wrong – the Tribunal should have accepted the complaint, but stayed it until the Administrators made a decision to give consent for the claim to proceed.

Although this decision may appear helpful to employees, there still remain practical problems in claiming against an insolvent company. A company in administration is obviously short of cash or it wouldn’t be in administration. Insolvency practitioners fees aren’t cheap and even relatively small companies can end up paying £100k in fees relating to the administration (and those fees are paid in priority to money owed to creditors!). If the Company has no money, it can not pay out an award to employees (or anyone else) – you can’t get blood out of a stone. Creditors are often lucky to get a few pence in the pound from a company in administration.

Employees should remember that they can get certain (very limited) payments from BERR (formerly DTI) if their employer can not pay them – see here for more details.