In the first case of its kind, a High Court judgment has confirmed how the government’s Job Retention Scheme (JRS) can be used by companies that have entered into administration during the COVID-19 pandemic.

This judgment is a blueprint for how employees of companies in administration during the COVID-19 crisis should be treated.

Richard Arthur, head of trade union law at Thompsons Solicitors

The judgment, handed down at the High Court of Justice Business and Property Courts of England and Wales today [Monday 13 April], clarified that the Joint Administrators can access the JRS for payment of 80 per cent of the wage costs of employees who have accepted the necessary changes to their terms and conditions without infringing insolvency laws.  

This is the first litigation involving the Government’s COVID Job Retention Scheme. The outcome provides the blueprint for administrators to make use of the COVID Job Retention Scheme to protect jobs during the COVID crisis.

Joint Administrators were appointed by Carluccio’s on 30 March – four days after HMRC first published details of a JRS that enabled employers to apply to HMRC for payment of up to 80 per cent of employees’ wage costs. Two days later, on 2 April, HMRC updated its guidance on the JRS to allow companies in administration to also make use of the scheme. 

Carluccio’s workers who had not yet responded to the Joint Administrators’ offer faced the prospect of imminent redundancy because insolvency laws typically lead to Administrators dismissing workers within 14 days of their appointment in order to escape liability.

The legal intervention was brought by Unite, with representation from Thompsons Solicitors and Old Square Chambers. The judgment means that Carluccio’s employees who have not yet responded to the offers of variation of their terms and conditions will now almost certainly have more time to do so, and - for those who agree to the variations – have the option of 80 per cent of their wages being paid through the JRS.

Unite’s assistant general secretary for political and legal affairs, Howard Beckett, said: “Time was running out for some of our members in Carluccio’s. They faced the prospect of being dumped out of work this weekend.

“In taking this action, Unite has secured them some wage security. It is now essential that all those Carluccio's workers who have either not received a letter or not responded to the letter from the administrator get in touch with their union, Unite, or the administrator immediately to ensure they are not dismissed and lose out on the opportunity that this court judgement has ensured.

“We will not hesitate to go into court to ensure our members livelihoods are protected in these difficult times.

“The new Job Retention Scheme was put together in record time and its interaction with other areas of law – in this case insolvency law – needed to be looked at by the High Court.

“This important decision ensures that no one is left behind in a hospitality sector reeling from the effects of the shutdown."

Richard Arthur, head of trade union law at Thompsons Solicitors, said: “The government’s Job Retention Scheme applies to companies in administration, which is welcome. But it wasn’t clear how the scheme would work alongside strict insolvency law requirements, which often lead administrators to dismiss the workforce within 14 days. This judgment is a blueprint for how employees of companies in administration during the COVID-19 crisis should be treated, and means that jobs can be protected and 80 per cent of their wage costs paid from the scheme.” 

Read the full judgment