Employment Rights Bill

Lord Moynihan of Chelsea Excerpts

Report stage
Wednesday 16th July 2025 Lords Chamber

Moved by

[Lord Moynihan of Chelsea]

108: Clause 27, page 48, line 13, at end insert—
“(A2) Subsection (A1)(a) shall not apply where the employer is undergoing relevant insolvency proceedings.(A3) Where the employer is undergoing relevant insolvency proceedings, the duty to consult under this section shall not arise.(A4) For the purposes of this section, “relevant insolvency proceedings” means any formal insolvency process under the supervision of an insolvency practitioner, including but not limited to—(a) administration;(b) administrative receivership;(c) Company Voluntary Arrangement (CVA); (d) Creditors’ Voluntary Liquidation (CVL);(e) compulsory liquidation.”Member’s explanatory statement
This amendment ensures that employers undergoing formal insolvency proceedings under the supervision of an insolvency practitioner are not subject to the collective consultation duties ordinarily required under subsection (A1)(a).

[Lord Moynihan of Chelsea (Con)]

My Lords, in moving Amendment 108, I will speak to Amendment 109, also in my name. My declaration of interest is that I have worked in my career with hundreds of companies, many of which had to create redundancies at one time or another and a few of which had to go into liquidation. I am not an insolvency practitioner.

The first of these amendments, Amendment 108, is a small but very important proposal. First, a disclaimer: I am not seeking to alter the vast majority of what is proposed under Clause 27, only that small minority of redundancy cases that occur when a company goes into insolvency. Also, I am not proposing any override of TUPE legislation, in particular in so-called pre-packs. I am proposing that on a non-partisan basis, we take advantage of the passing of this Bill to rectify a long-standing conflict between two separate laws—a conflict that often places insolvency practitioners in an impossible position.

What is this conflict? It is between the provisions of the Insolvency Act 1986 versus the Trade Union and Labour Relations (Consolidation) Act 1992, the latter of which, as your Lordships know, today’s Bill seeks. The conflict has long existed; it is not a function primarily of the Bill we are discussing today. Let me explain briefly what it is. Insolvency practitioners are required to act quickly, so that value is not eroded. The 1992 Act, however, requires consultation of between 30 to 45 days, which would utterly frustrate the imperative to move swiftly. The liquidator is basically required to break one or the other laws, and always chooses to break the 1992 law—and will choose to break it as amended by this Bill, because the liquidator has to act speedily. A long consultation, whether 30 or 45 days, is always found to be impossible.

As a result, ambulance chasers write offering “free money” to all employees because the law has been broken and therefore the provision comes in that penalty money should be paid to these workers. This does not happen in all cases—only when trade unions are involved or the insolvency is large enough for the no-win no-fee crowd to move in. Much of the money in bankruptcies then ends up in the hands of lawyers rather than any of the creditors. We should note that in most non-liquidation situations these stringent provisions make such penalty awards rare. An employer would be foolish to flout the requirements. It happens only in liquidation, where the liquidator is essentially forced to choose to flout one law or another.

--- Later in debate ---

This afternoon I looked at the R3 website, and one concern that it had with this amendment was that it would devalue a business’s value on an ongoing basis to a potential purchaser. Why should employees suffer because of that devaluation?

[Lord Moynihan of Chelsea (Con)]

I apologise for intervening, but is the Minister saying that R3 stated that it was against this amendment?

[Lord Leong (Lab)]

The R3 website said that it was concerned about the amendment because it may devalue a company’s valuation on an ongoing basis because of the day-one rights accorded to employees. That is what it said on the website.

[Lord Moynihan of Chelsea (Con)]

I do not want to detain the House, but I am in ongoing discussions with R3, and it has never said this. Is the Minister quite sure that it is not saying that it is concerned about the clause, rather than the amendment?

[Lord Leong (Lab)]

I may be wrong. Sorry: it is not the noble Lord’s amendment; it is the clause. I apologise for that. But it is the same thing: if it is against the clause, it is because it is concerned about the valuation of the business. My point is, why should the employees suffer because of the taking into account of day-one rights?

On Amendment 109, I inform the noble Lord that the notification period in the current law aligns with the consultation period. This means in practice that whenever an employer begins a collective consultation, they must also notify the Secretary of State at that point. Setting these periods at different times could cause confusion for employers and increase the risk of non-compliance. The objective of the notification provision is that such notifications may be distributed to appropriate government departments and agencies that are best placed to support affected employees. This amendment would mean that those agencies would be less prepared to support large volumes of individuals who have been made redundant. We have had extensive engagement with employers throughout the passage of the Bill, and the notification timeline has not been raised as a concern. Therefore, this amendment is unnecessary.

I take this opportunity to say to the noble Lord that we will engage with the Insolvency Practitioners Association, raise and discuss the issues that noble Lords have raised, and listen to what it has to say. With that in mind, I ask the noble Lord to withdraw Amendment 108.

[Lord Moynihan of Chelsea (Con)]

I thank noble Lords for their patience in enduring at this late hour this somewhat arcane discussion. The noble Lord, Lord Goddard, emphasised the importance of consultation and, indeed, the essential nature of it, and said how vulnerable employees are. But they are not vulnerable in this particular circumstance; they have priority as creditors above all other creditors. If there is money, they will get it. If there is no money, they will get it from the Redundancy Payments Service. But why, having got their full amount of redundancy money, should they then scoop the pot and get three times as much because of a flaw in the law that will leave, for example, small trade creditors not receiving anything and possibly facing bankruptcy? That is not to mention the fact that a lot of this money will usually come from the taxpayer—ultimately, the source of funds for these penalty payments—via HMRC, where the Redundancy Payments Service is, thus increasing the deficit. It would create a mini black hole, if I could be so foolish as to mention that.

My noble friend Lord Hunt of Wirral ably reinforced the need for this amendment. The Minister emphasised the importance of consultation. I understand that, but I believe Hansard will show that I have already dealt with most of the items in his response. I will not delay noble Lords any longer by going over that ground again, except to say once again that when he asks why employees should suffer, the answer is that they will not suffer. I hoped I had explained that. I am chagrined to understand that I have not. They have total priority above all other creditors in receiving their full redundancy payments.

All I ask is, why should they, as a result of a glitch in the law, receive in total three times that much as a so-called penalty payment? They will not be paid by the employer because the employer will be long gone. They will not be paid by the insolvency practitioner, in facing the impossible task of obeying both laws at the same time. They will be paid mostly by us, first through HMRC and through it the taxpayer.

The hour is late and so, if only on compassionate grounds, I beg leave to withdraw my amendment.

Amendment 108 withdrawn.