Legal twist threatens Debenhams jobs - report

By

Sandra Halliday

Published
Apr 16, 2020

There’s confusion at the moment around Debenhams administrators' responsibility for paying the retailer's employees wages versus the UK government's Job Retention Scheme (JRS) under which 80% of wages are being paid on behalf of companies.

With Debenhams having now filed for administration, a High Court judge this week refused to rule on the exact commitment the retailer’s administrators have for salaries under employee contracts.

It mean the administrators could be liable for the wages of furloughed staff.

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The retailer last week appointed FRP Advisory to run its administration process, but with a "light touch" that should allow it to reopen once the retail lockdown is over. 

Around 13,000 of the UK retail staff are currently on furlough with their salaries being 80% paid by the state. But FRP’s legal team has said it could be forced to make “a large part of the significant number of employees of Debenhams” redundant if it really is responsible for those staff wages, Retail Gazette reported.

The administrators had applied for a High Court ruling regarding a part of UK insolvency law that could mean the wages of employees furloughed before the administration filing would enjoy “super-priority status” and be payable before creditor claims and administration expenses.

It all centres on whether FRP “adopted” the contracts of employment on taking over as administrator. The judge, who didn’t make a definitive declaration, did say: “I think it is likely that the participation by companies in administration in the JRS and the payment of equivalent amounts to furloughed employees… means that the contracts of employment… will have been adopted by the administrators.”

FRP’s barrister said that if those contracts were seen to have been adopted, FRP would have to decide whether to go along with that “or – as seems more likely – will be compelled to make the majority of [furloughed staff] redundant”.

A decision will need to be made within 14 days of March 9, but it’s expected that Debenhams could appeal.