No requirement for the basic award to be paid when the claimant had an ongoing unfair dismissal case when his employer entered administration.

The claimant had commenced proceedings against the respondent for unfair dismissal.  After filing an ET3 denying liability, the respondent became insolvent and went into administration. The claim was stayed but the claimant submitted a proof of debt to the administration for the full basic award and maximum compensatory award. The administrator accepted the debt and paid 2.52% of the amount.

The claimant then also applied to the Insolvency Service for payment of the basic award and this was rejected.  That was the basis of this claim to the EAT.

At first instance, the Tribunal rejected the claim stating that there had to be an Employment Tribunal decision before the Secretary of State would be liable to make the payment.  On appeal, the EAT rejected the appeal. They stated that the Insolvency Directive within EU Law should only be used where it is linguistically possible in relation to the Employment Rights Act 1996.  Therefore, it only applied to a debt in the form of a basic award for unfair dismissal or an arbitral award under a dismissal procedures agreement. This had to be taken from the day of the insolvency and as there was no Tribunal decision at the date of the insolvency there was no claim that could be made.

An interesting case outlining the limits to the extent to which the state will step in and protect individuals when their employer has gone into insolvency. It is clear that the date of insolvency is the date at which the debts are examined and as the claimant had no decision from the Tribunal regarding his outstanding unfair dismissal action this did not pass the liability onto the state to protect that individual as a former employee.

You can read the case in full here.