What employment lessons can be learnt from the collapse of Arcadia?

News that Arcadia group could face potential collapse was the latest in a string of recent controversies to surround Philip Green. The Topshop tycoon’s accusations of sexual harassment, and now rumoured collapse of his Arcadia Empire, have brought to light a number of pertinent employment issues.

What should employers bear in mind when facing administration?

It goes without saying that if a retailer is facing administration and store closure, job losses are expected. For employers in this situation, there are some best practice steps they can follow to ensure that the risk of employee-related legal action is minimised in the process.

Transfer of employment is protected under the Transfer of Undertakings regulations (TUPE), which apply to some situations where there is an insolvency without a liquidation of the business. So, for example, in administration (i.e. not a liquidation) the employees are entitled to transfer if there is another company that is acquiring the business out of administration. This typically applies in a ‘pre pack’ administration scenario. There may be changes to terms of employment, however, which can be permitted in these situations and there will probably be redundancies.

Under the TUPE regulations, employees are entitled to be informed and consulted about the transfer before it occurs. In a fast moving insolvency situation this can be tricky to manage. There are protective awards for failure to inform and consult employee representatives about the transfer, although these vary depending on the circumstances. Some pay and benefits for redundant employees may be paid out from National Insurance Fund.

When it comes to redundancy, employers who have a workforce of over twenty will have procedures laid down for collective redundancies, otherwise employees may be eligible for ‘protective payment’. A company is required to meet minimum consultation periods with employee representatives before dismissals take effect. If these are not adhered to, staff may be eligible to claim via an employment tribunal. In a fast-moving insolvency this can be tricky to handle as the usual minimum consultation requirements may be impossible to achieve.

What are the wider industry trends at play that contributed to Arcadia’s collapse?

The increasing presence and prevalence of technology, going hand in hand with customer centricity and demand, has meant that many big retailers have had to rethink their business models to compete with online suppliers. This was the case for Arcadia, where the likes of Topshop, in its heyday a stalwart brand for its target market, has been overtaken by retailers such as ASOS and Boohoo, which offer similar product ranges, but purely online. The advantage is that online retailers are able to track consumer behaviour more closely, so having more agility, being able to adapt to changing trends more quickly.

For retailers that are in the process of adopting new technology to stay competitive in this ever-changing landscape, there are accompanying considerations that employers should bear in mind to ensure employees are able to adapt to a changing work environment. This may include providing training to use new software and doing so each time this is updated. Employers should also consider offering additional health and safety training, as the introduction of new technology may introduce fresh risks to the workplace. Above all, employers should ensure that any material changes made to the nature of employee job descriptions are accompanied by requisite changes in contract of employment.

 

Jennifer Maxwell-Harris, Joelson

Jennifer Maxwell-Harris

Partner – Employment & Immigration

+44 (0) 20 7580 5721

jennifer.mh@joelsonlaw.com

This article is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.