Employees before administrators, says judge

A UK judge has ruled that when a company goes into administration, cash owed to employees must take priority over the administrators' fees and administration costs.

The ruling could have implications for the administrators in cases like the collapse of Granville Technology Group, where companies make large-scale redundancies with little or no warning, according to a report on TheLawyer.com.

Protective awards can be made by industrial tribunals in cases where a company making redundancies has not consulted properly with its employees. A consultation period of 90 days is required by law, if more than 100 employees being laid off at one time.

If a tribunal decides to make a protective award to redundant staff, the employer must pay staff for up to 90 days from the date of dismissal.

Granville Technology, the company behind the Time and Tiny computer brands, went into administration late last month, with 1,500 employees being made redundant immediately.

On the basis of Justice Peter Smith's ruling, if those employees apply for a protective award, that could take precedence over the fees payable to Grant Thornton, the administrators, and its legal firm, Lovells.

Grant Thornton said it had no comment on the story.

You can read the ruling in full (although, be warned, this is full-on legalese) here. ®