The employment tribunal has issued protective awards in favour of 13 former employees of Newcastle firm Short Richardson & Forth (SRF) for failing to consult over their redundancies.
The firm, which is in voluntary liquidation, was also ordered to pay more than £25,000 for wrongful dismissal and outstanding holiday pay to various staff members.
SRF, which was a well-known name in the region, told employees on 5 September 2022 that it would close on 30 September.
However, the firm failed to inform and consult with them about their redundancies and so breached its obligations under the Trade Union and Labour Relations (Consolidation) Act 1992, which apply when there are more than 20 staff.
The claimants sought a protective award and the tribunal ordered the maximum of 90 days’ pay. Where an employer is insolvent, the Insolvency Service pays the award, but the amount is capped at eight weeks’ pay.
SRF launched in 1978 and a statement of affairs filed at Companies House earlier this year explained that the firm had been in a good financial state, with profit of £264,000 on a turnover of £1.9m in the year to 30 April 2021.
“The issues started in May 2021 when employees were contacted by recruitment consultants and subsequently six fee-earners were lost to rival firms,” it said. “This was a large percentage of the fee-earner base.
“The market has been unprecedented in its aggressiveness since the Covid pandemic. Most of the losses were up-and-coming junior fee-earners, some who had been with us for a number of years and training with us.
“Replacing those fee-earners proved difficult and in some cases impossible. There was a lack of any candidates and the expected salary costs were large.” It also affected the “cohesiveness” of the firm.
Later that year, SRF was disrupted by another fee-earner leaving and trying to poach some of its major clients, while a review of that fee-earner’s files showed that many needed remedial action, which was done at the firm’s expense.
SRF also suffered “some substantial and unexpected bad debts” from clients refusing to pay as well as work in progress locked up for longer than anticipated. Its lease was up and case management software nearing end of life.
“Individually these problems were an annoyance but nothing out of the ordinary commercial course of events, but the aggregate effect was considerable.”
SRF then sought a merger but two collapsed at the last minute, first in May 2022 and then July. But shortly after telling staff in August 2022 that the second merger may be back on, and that it had another restructuring option, the head of commercial property and then head of commercial resigned.
These caused the merger talks to fail once and for all, and the directors to conclude that SRF was no longer viable once their three-month notice periods expired – the firm was breaking about even at the time and they forecast that, while income would drop, they would need to increase salaries to retain staff.
They began an orderly shutdown of the firm, with all staff dismissed on 30 September except for a cashier and a secretary working with a director to close down the office.
The statement of affairs said that SRF had the assets to pay HM Revenue & Customs the £110,000 it was owed, but that the creditors who would be out of pocket were mainly the three directors, to the tune of about £470,000.