The High Court has provided guidance on how insolvency law interacts with the Coronavirus Job Retention Scheme (CJRS). This will be useful to companies in administration or those at risk of it.
There was uncertainty around whether companies that go into Administration could access the CJRS. The general rule is that Administrators must act within 14 days of their appointment to make staff redundant in order to avoid liability for their wages and under their employment contracts.
The confusion lay in whether Administrators can use the CJRS and what impact this would have on that 14-day timescale.
The High Court has ruled that Administrators can make use of the CJRS and that any employees who have been furloughed prior to the company entering Administration do not have to receive notice that their employment is to come to an end within 14 days of the appointment of the Administrator.
The ruling arose in the administration of restaurant chain Carluccio’s. FRP were appointed as Administrators on 30 March 2020 and sought confirmation of the position regarding the CJRS. With many employees furloughed, it was unclear as to whether they could continue to make use of the CJRS or if they had to use the normal process of announcing redundancies within 14 days.
The decision has received positive responses from many and it should help to save more jobs in the long term as Administrators can take some time and use the CJRS.
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