Experts warn of contract chaos after MG Rover redundancy row

The news that 80 MG Rover workers may be entitled to a full redundancy package as they are actually employed by Phoenix Venture Holdings should “strike fear into the heart” of group companies, lawyers have warned.

The 80 staff are reported to be planning to seek enhanced redundancy packages or alternative employment because their contracts state that Phoenix Holdings is their official employer.

If Phoenix is found to be their employer, it will be obliged to pay out more than the standard £5,000 redundancy payout available to workers forced out of their jobs as a result of the car manufacturer’s insolvency.

Failure to carry out correct redundancy procedures could lead to unfair dismissal claims and subsequently an additional payout, according to Shona Findlay, of the people services team at law firm McGrigors.

“This should strike fear into the heart of group companies,” she said. “They may have to reconsider their policies and contracts, otherwise they could be liable [for debts incurred by insolvent companies they own].”

Changes to employment policies and contracts should be driven by HR departments, Findlay said.

“HR is at the coalface of this issue,” she said. “[HR professionals] will be familiar with the content of employment contracts, and this sort of issue will not necessarily be on the board’s agenda, despite its importance.”

However, employers need to do more than simply make cosmetic changes to contracts, as tribunals will always look at the bigger picture, such as who actually pays the staff, who looks after their health and safety and so on, Findlay said.

“Reviewing the contract doesn’t mean that you are out of the woods,” she said.

“Employers must look at the true position and reflect that in the contract, not try and create a position [for legal purposes].”

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