Government to review worker protections in Clerys-type deals

Legal experts will examine situations where company’s assets are split from operating entity

Clerys staff were left only with statutory redundancy when the shop closed. Photograph: Dave Meehan/The Irish Times

Clerys staff were left only with statutory redundancy when the shop closed. Photograph: Dave Meehan/The Irish Times

 

The Government has appointed two law experts to examine the legal protections for workers in cases where operations and assets may be moved to separate legal entities as part of a corporate restructuring.

The examination will look at situations where assets in a company are separated from the operating entity, and how the position of employees can be better protected in such situations.

This move comes in the wake of the closure of Dublin department store Clerys in controversial circumstances last June. This involved a joint venture called Natrium Ltd, comprising Irish developer D2 Private and Cheyne Capital Management in the UK, with funding from US-based Quadrant Real Estate Partners, acquiring the business and building from Boston-based Gordon Brothers.

Natrium then sold the operating company for €1 to a UK insolvency specialist, Jim Brydie, who proceeded to close the shop and liquidate the business.

This left staff with nothing more than their entitlement to statutory redundancy payments from the State.

Concession holders at the store and other creditors were also left out of pocket. Natrium continues to own the property at O’Connell Street, which is intends to redevelop for other uses.

Kevin Duffy, chairman of the Labour Court, and Nessa Cahill, a company law specialist, have been given eight weeks to examine existing legislation and to consider ways to best protect the interests of workers in such cases.

Separately, the Company Law Review Group has been asked to examine legislation with a view to recommending ways that company law could be amended to better safeguard employees and creditors.

Corporate veil

The Company Law Review Group is to explore instances where the “corporate veil should be lifted”, the strengthening of directors’ duties to employees, checks and balances to strengthen obligations to employees for better protection in company restructuring, and circumstances in a liquidation of an insolvent company where liabilities can be met from solvent companies in the same group or in related companies.

Siptu’s services division organiser Ethel Buckley said the establishment of the reviews was a “positive development” for workers.

“Siptu expects that following this review the legislation will be amended to ensure employees can be better protected in such situations,” she said.

“That the current situation cannot be allowed to continue is evident from the overwhelming support provided to the Clerys workers in their campaign for justice. The behaviour of Natrium, the new owners of Clerys, which led to over 400 job losses and a cost of over €2 million in redundancy payments being forced upon the State must not be repeated.”

The Minister for Jobs, Enterprise and Innovation Richard Bruton said the Government would be careful not to conduct the review process with undue haste.

“While we must be careful not to take rushed steps that might create bad law and further unintended consequences, I believe we have enough information now from the Clerys liquidation to proceed to the next step which we are announcing today,” he said.

Mr Bruton added that the timing of these reviews, just weeks before a general election, was “prudent” given that the liquidators’ report on the Clerys transaction has just been filed.

The experts have been asked to submit their reports by March 11th.