Insolvency: Temporary Scheme for Compensatory Payment

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A decision made 14 June 2011 regarding:

Decision Reference: MD-S-2011-0046
Decision Summary Title :	DS - Insolvency Discretion Extended		Date of Decision Summary:	9 June 2011
Decision Summary Author:	Policy Principal		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title :	WR - Insolvency Discretion Extended		Date of Written Report:	9 June 2011
Written Report Author:	Policy Principal		Written Report : Public or Exempt?	Public
Subject: Insolvency: Temporary scheme for compensatory payment in lieu of statutory period of notice on termination of employment - Extension
Decision(s): The Minister decided to amend the Temporary Insolvency Payments Scheme (R.44/2009) retrospectively so that; "in wholly exceptional circumstances, where the employer has ceased trading, but has not become subject to formal insolvency proceedings, the Minister will give consideration, in consultation with the Viscount, to making compensatory payments under the Scheme where he is reasonably satisfied that the employer will not recommence trading, and that a court judgment has been taken against the employer.”
Reason(s) for Decision: The Minister for Social Security believes that discretion should be extended under the Temporary Insolvency Payments Scheme that would entitle employees to claim compensatory notice payments in appropriate circumstances where statutory notice pay is owed to those employees.
Resource Implications: There will be an additional cost to the States as more claims will be accepted by the Social Security Department, but the sum cannot be quantified until the Minister has exercised this discretion and employee’s claims have been received. The Minister is aware of a small number of employers who ceased trading during 2010 without formal insolvency proceedings ensuing and the Minister will consider extending the scheme retrospectively in respect of affected employees.
Action required: Policy Principal to request that the Greffier of the States arrange for the amendment to the Report to be presented to the States at the earliest opportunity.
Signature:		Position: Minister
Date Signed:		Date of Decision (If different from Date Signed):

Insolvency: Temporary Scheme for Compensatory Payment - Extension

Amendment to R.44/2009 - Insolvency: Temporary scheme for compensatory payment in lieu of statutory period of notice on termination of employment - Extension

The Minister for Social Security presented a Report to the States on 29 April 2009 setting up a scheme (‘the temporary scheme’) to deliver compensatory notice payments to employees made redundant by insolvency.

On 17 June 2009, the States decided to extend the temporary scheme to enable the Minister, in consultation with the Viscount, to use discretion to make payments to workers who have been made redundant without the payment of statutory notice by businesses that have stopped trading, even if the businesses have not yet been declared insolvent. That discretion has since been applied in accordance with a Comment presented by the Minister (P.67/2009 Com.) which extends the scheme where insolvency is underway or inevitable.

The Minister believes that the temporary scheme should be capable of demonstrating flexibility and has decided that discretion should also be available (in consultation with the Viscount) where an employer is not insolvent, but has ceased trading and is unlikely to recommence trading. The intention is to entitle affected employees to claim statutory notice pay without having to wait for the sale of assets and any amounts to be shared via any enforcement process.

During 2010, a small number of businesses ceased trading resulting in employees being made redundant, but in circumstances where a formal insolvency situation is unlikely to ensue. This extension will be applied retrospectively to the employees concerned.

The Report (R.44/2009) will be amended so that the paragraph on page 4 which starts “The temporary scheme only applies where the employer has become formally insolvent…” will be removed and replaced with the following two paragraphs setting out the two types of discretion. Any references to the insolvency of the employer will be interpreted as including a situation where discretion has been extended as described.

“In wholly exceptional circumstances, where the employer has ceased trading, but has yet to become subject to formal insolvency proceedings, the Minister will give consideration, in consultation with the Viscount, to making compensatory payments where he is reasonably satisfied that the employer will become subject to such proceedings, or that related proceedings have commenced.

In wholly exceptional circumstances, where the employer has ceased trading, but has not become subject to formal insolvency proceedings, the Minister will give consideration, in consultation with the Viscount, to making compensatory payments under the Scheme where he is reasonably satisfied that the employer will not recommence trading, and that a court judgment has been taken against the employer.”