Directors to be personally liable for unpaid tribunal awards under Labour proposals 

June 12th, 2024

Poll data as of 7 May 2024 has indicated a decisive Labour victory in the coming general election. Polls can never be fully relied upon as accurate estimates of election results, there is always a chance that the general election outcome differs completely from what polls are portraying. However, given the dissatisfaction in the UK with the Conservative party, many consider Labour to be a government in waiting. 

So, what would a Labour government mean for employment law and employment rights in the UK?

In 2021, Labour published its Employment Rights Green Paper making a broad range of pledges on how it intends to change employment law if it gains power. One significant change proposed is personal liability for directors of companies that fail to comply with tribunal orders. 

Usually, if a worker is successful in bringing Employment Tribunal claims against an employer and is awarded compensation, the Tribunal will order the company to pay compensation towards the worker. However, difficulty arises when the company falls into financial difficulty, which affects their ability to pay the compensation ordered by the Tribunal. 

Some companies wind up and restart under a new name to escape the debt of the compensation, and some become insolvent and stop trading. In these circumstances, it becomes difficult for workers to recover the debt of the compensation because the claim is against the company and not the directors. Citizens advice provides some useful guidance regarding these situations here

The proposal by Labour would make it easier for workers to recover compensation, as they can pursue the debt from directors where the company fails to pay due to financial difficulty. This may also lead to many employers taking a more careful approach regarding how they treat workers and how they engage in litigation, as directors will want to avoid the risk of paying out compensation personally. Whether the proposals made by Labour will be implemented as law remains to be seen. T

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