HC Deb 13 June 2002 vol 386 c1391W
Helen Southworth

To ask the Secretary of State for Trade and Industry if she will give a higher priority in her review of employment legislation to the position of employees as creditors in relation to their contractual entitlements in situations where the employing company becomes insolvent. [60091]

Alan Johnson

Under the Insolvency Act 1986 an employee of an insolvent employer has the right to make a preferential claim in the proceedings for certain statutory amounts of unpaid remuneration and unpaid holiday pay. My right hon. Friend the Secretary of State for Trade and Industry does not propose to alter this priority.

Under the insolvency payments provisions of the Employment Rights Act 1996, the employee is entitled to claim a certain statutory proportion of these debts from the Secretary of State, who will pay them out of the National Insurance Fund. The Secretary of State then "steps into the former employees shoes" and has the same preference as employees would have in respect of those debts—and indeed the same preference as they still do have in respect of the proportion of those debts that exceed the statutory maximum payable under the Employment Rights Act, but which still fall within the statutory maximum under the Insolvency Act. However, current section 189(4) of the Employment Rights Act 1996 allows the Secretary of State to be paid in priority to any preferential claims lodged in the insolvency proceedings by former employees.

The Government will be tabling an amendment for Commons Report stage of the Enterprise Bill, following consideration of arguments put forward at Commons Committee stage, to remove this "super preference".

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