Employment Protection (Consolidation) Act 1978

122 Employee’s rights on insolvency of employer. E+W+S

(1) If on an application made to him in writing by an employee the Secretary of State is satisfied—

(a) that the employer of that employee has become insolvent; and

[F1 (aa) that the employment of the employee has been terminated; and]

(b) that on the relevant date the employee was entitled to be paid the whole or part of any debt to which this section applies,

the Secretary of State shall, subject to the provisions of this section, pay the employee out of [F2 the National Insurance Fund] the amount to which in the opinion of the Secretary of State the employee is entitled in respect of that debt.

[F3 (2) In this section “the relevant date”—

(a) in relation to arrears of pay (not being remuneration under a protective award made under section 101 of the Employment Protection Act M1 1975) and to holiday pay, means the date on which the employer became insolvent;

(b) in relation to such an award and to a basic award of compensation for unfair dismissal, means whichever is the latest of—

(i) the date on which the employer became insolvent;

(ii) the date of the termination of the employee’s employment; and

(iii) the date on which the award was made;

(c) in relation to any other debt to which this section applies, means whichever is the later of the dates mentioned in sub-paragraphs (i) and (ii) of paragraph (b).]

(3) This section applies to the following debts:—

[F4 (a) any arrears of pay in respect of one or more (but not more than eight) weeks;]

(b) any amount which the employer is liable to pay the employee for the period of notice required by section 49(1) or (2) or for any failure of the employer to give the period of notice required by section 49(1);

[F5 (c) any holiday pay—

(i) in respect of a period or periods of holiday not exceeding six weeks in all; and

(ii) to which the employee became entitled during the twelve months ending with the relevant date;]

(d) any basic award of compensation for unfair dismissal (within the meaning of section 72);

(e) any reasonable sum by way of reimbursement of the whole or part of any fee or premium paid by an apprentice or articled clerk.

[F6 (4) For the purposes of this section, the following amounts shall be treated as arrears of pay, namely—

(a) a guarantee payment;

(b) remuneration on suspension on medical grounds under section 19;

(c) any payment for time off under section 27(3) or 31(3) or 31A(4);

(d) remuneration under a protective award made under section 101 of the Employment Protection Act M2 1975;

(e)]

F7 (5) The total amount payable to an employee in respect of any debt mentioned in subsection (3), where the amount of that debt is referable to a period of time, shall not exceed [F8 £198.00] in respect of any one week or, in respect of a shorter period, an amount bearing the same proportion to [F8 £198.00] as that shorter period bears to a week.

(6) The Secretary of State may vary the limit referred to in subsection (5) after a review under section 148, by order made in accordance with that section.

(7) A sum shall be taken to be reasonable for the purposes of subsection (3)(e) in a case where a trustee in bankruptcy or liquidator has been or is required to be appointed if it is admitted to be reasonable by the trustee in bankruptcy or liquidator under [F9 section][F10 348 of the M3 Insolvency Act 1986] (effect of bankruptcy on apprenticeships etc.), whether as originally enacted or as applied to the winding up of a company by rules under [F10 section 411 of that Act].

(8) Subsection (7) shall not apply to Scotland, but in Scotland a sum shall be taken to be reasonable for the purposes of subsection (3)(e) in a case where a trustee in bankruptcy or liquidator has been or is required to be appointed if it is [F11 accepted] by the trustee in bankruptcy or the liquidator for the purposes of the bankruptcy or winding up.

(9) The provisions of subsections (10) and (11) shall apply in a case where one of the following officers (hereafter in this section referred to as the “relevant officer”) has been or is required to be appointed in connection with the employer’s insolvency, that is to say, a trustee in bankruptcy, a liquidator, [F12 an administrator,] a receiver or manager, or a trustee under a composition or arrangement between the employer and his creditors or under a trust deed for his creditors executed by the employer; and in this subsection [F13 “trustee”, in relation to a composition or arrangement, includes the supervisor of a][F10 voluntary arrangement proposed for the purposes of, and approved under, Part I or VIII of the Insolvency Act 1986].

(10) Subject to subsection (11), the Secretary of State shall not in such a case make any payment under this section in respect of any debt until he has received a statement from the relevant officer of the amount of that debt which appears to have been owed to the employee on the relevant date and to remain unpaid; and the relevant officer shall, on request by the Secretary of State, provide him, as soon as reasonably practicable, with such a statement.

[F14 (11) If the Secretary of State is satisfied that he does not require such a statement in order to determine the amount of the debt that was owed to the employee on the relevant date and remains unpaid, he may make a payment under this section in respect of the debt without having received such a statement.]

Textual Amendments

F1 S. 122(1)(aa) inserted by Insolvency Act 1985 (c. 65, SIF 66), s. 218(2)

F2 Words substituted by Employment Act 1990 (c. 38, SIF 43:5), s. 16(1), Sch. 2 para. 1(4)

F3 S. 122(2) substituted by Insolvency Act 1985 (c. 65, SIF 66), s. 218(3)

F4 S. 122(3)(a) substituted by Employment Act 1982 (c. 46, SIF 43:5), Sch. 3 para. 4(2) with saving in S.I. 1982/1656, Sch. 2

F5 S. 122(3)(c) substituted by Employment Act 1982 (c. 46, SIF 43:5), Sch. 3 para. 4(3) with saving in S.I. 1982/1656, Sch. 2

F6 S. 122(4) substituted by Insolvency Act 1985 (c. 65, SIF 66), s. 218(4)

F7 Words repealed by Social Security Act 1986 (c. 50, SIF 113:1), s. 86(2), Sch. 11

F8 Words in s. 122(5) substituted (1.4.1991) by virtue of S.I. 1991/464, art. 2 (with effect as specified in art. 3) (which S.I. is revoked (1.4.1992) by S.I. 1992/312, art. 1(2) (with art. 3)).

F9 Words substituted by Insolvency Act 1985 (c. 65, SIF 66), s. 218(5)

F10 Words substituted by Insolvency Act 1986 (c. 45, SIF 66), s. 439(2), Sch. 14

F11 Word “accepted" substituted (S.) for “admitted" by Bankruptcy (Scotland) Act 1985 (c. 66, SIF 66), s. 75(1), Sch. 7 para. 14(2)

F12 Words inserted by Insolvency Act 1985 (c. 65, SIF 66), s. 218(6)(a)

F13 Words substituted by Insolvency Act 1985 (c. 65, SIF 66), s. 218(6)(b)

F14 S. 122(11) substituted by Employment Act 1989 (c. 38, SIF 43:1), ss. 18(2), 29(6), Sch. 9 para. 4(1)

Modifications etc. (not altering text)

C1 S. 122 restricted by Dock Work Act 1989 (c. 13, SIF 43:5), s. 7(5), Sch. 2 para. 7(2)

C2 S. 122 modified by Dock Work Act 1989 (c. 13, SIF 43:5), s. 7(5), Sch. 2 para. 7(2)(a)

Marginal Citations

M1 1975 c.71(43:1).

M2 1975 c.71(43:1).

M3 1986 c. 45