The Supreme Court’s decision in R (on the application of Palmer) (Appellant) v Northern Derbyshire Magistrates Court and another (Respondents) (“Palmer”) is a salutary reminder of the consequences of failing to file Form HR1 where collective redundancies are planned.  Although Mr Palmer, who had been appointed as an administrator of West Coast Capital (USC) Ltd, was ultimately found by the Supreme Court not to be personally criminally liable for the failure to notify, the decision turned on the court’s finding that an administrator was not an “officer” for the purposes of the statutory offence. 

However, criminal liability remains for employers and individuals performing other roles, as we explore below.

What is the obligation to file Form HR1?

The Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”) imposes two key procedural obligations on employers proposing to make 20 or more employees redundant within a period of 90 days or less:

• a duty to consult appropriate representatives of the affected employees (under section 188, TULRCA); and
• a duty to notify the Secretary of State of the proposed redundancies (under section 193, TULRCA).

In practice, employers notify the Secretary of State by completing Form HR1.

The time limits are similar for both duties. The consultation must commence and the Secretary of State must be notified: 

• where the employer is proposing to dismiss 100 or more employees, at least 45 days before the first dismissal takes effect; or
• where the employer is proposing to dismiss between 20 and 99 employees, at least 30 days before the first dismissal takes effect.

In addition, the employer must notify the Secretary of State before giving notice to terminate an employee's contract of employment in respect of any of those dismissals.

Failure to notify the Secretary of State is a criminal offence under section 194 of TULRCA, and can lead to criminal liability for:

• the employer; and 
• individuals – where an employer commits an offence under section 194 and the offence is “proved to have been committed with the consent or connivance of, or to be attributable to neglect on the part of, any director, manager, secretary or other similar officer of the body corporate, or any person purporting to act in any such capacity”, that individual will also be criminally liable.

What happened in Palmer?

Mr Palmer was an administrator of West Coast Capital (USC) Ltd ("USC"). On 14 January 2015 (the day after USC went into administration), employees at a USC warehouse were handed a letter signed by Mr Palmer, stating that they were at risk of redundancy and giving notice of USC’s intention to consult with them at a staff meeting that day. Shortly afterwards, they were handed a further letter, also signed by Mr Palmer, dismissing them with immediate effect. No notice of the redundancies was given to the Secretary of State until 4 February 2015. Mr Palmer and USC’s sole director were each charged with an offence contrary to section 194 of TULRCA.

Mr Palmer argued that he had not committed an offence because an administrator appointed under Part II of the Insolvency Act 1986 is not an "officer" for the purposes of the collective redundancies requirements.  

The Supreme Court agreed. It overturned the decision of the Divisional Court, holding that an administrator is not an “officer” and cannot be held criminally liable where an employer has failed to comply with the notification obligation. In doing so, the Supreme Court found that there was a clear distinction between an officer of the company and an administrator.  This approach was consistent with insolvency legislation.  

Takeaway

The Supreme Court’s decision will provide reassurance to administrators that they will not face personal criminal liability for the performance of their duties in situations where an employer is unable to meet the dismissal notification requirements. 

However, the case serves as a reminder that timely filing of a Form HR1 is critical when conducting a collective redundancy exercise.  In addition to the potential corporate and personal criminal liability, an employer who fails to comply with the obligation leaves itself open to an unlimited fine. Combined with the power of the employment tribunal to make a protective award of up to 90 days’ uncapped pay per employee for failure to consult, this means that breaching the duties under TULRCA could result in a hefty financial liability.