Secretary of State for Employment v Mann (Mann v Secretary of State for Employment)

A statutory guarantee of an insolvent employer’s debts covers only sums which the employee was entitled to receive from the employer under domestic law. A directive without horizontal effect cannot enlarge the employer’s liability and thereby increase the guarantor’s derivative liability.

The insolvency guarantee directive did not apply to an administrative receivership commenced privately by a debenture holder. Any wider protection afforded by domestic legislation was a purely domestic remedy. Legislation implementing a directive should nevertheless receive the same conforming interpretation inside and outside the directive’s scope. Accordingly, an employee entitled to guaranteed arrears for no more than eight weeks may select the eight weeks most favourable to the claim, although the guarantor may use a chronological calculation unless the employee requests otherwise.

Swan Hunter Shipbuilding & Engineering Group Ltd entered administrative receivership. Its receivers dismissed 408 employees without consulting their union. An industrial tribunal made a protective award for the maximum 90-day period under the Trade Union and Labour Relations (Consolidation) Act 1992, but the insolvent employer could not pay it.

The employees claimed from the Secretary of State under section 122 of the Employment Protection (Consolidation) Act 1978. The Secretary of State applied the statutory eight-week and weekly monetary limits and calculated the employer’s liability using the then-effective set-off provision in section 190(3) of the 1992 Act.

The Employment Appeal Tribunal held the set-off contrary to Community law. The Court of Appeal reversed that decision because the award related to a period outside the guarantee required by Council Directive 80/987/E.E.C. The employees appealed. The principal questions concerned the set-off, the weekly ceiling and the selection of the eight guaranteed weeks.

1. Appeal dismissed unanimously. Lord Hoffmann delivered the leading speech. Lord Slynn of Hadley, Lord Jauncey of Tullichettle, Lord Hope of Craighead and Lord Hobhouse of Woodborough agreed with his reasons.

2. Per Lord Hoffmann, the Secretary of State’s liability under section 122 of the Employment Protection (Consolidation) Act 1978 was that of a statutory guarantor. It extended only to a debt which the employee was entitled to receive from the employer on the relevant date. Section 190(3) of the Trade Union and Labour Relations (Consolidation) Act 1992 therefore reduced the employer’s liability where contractual remuneration or damages covered the same period as the protective award. The Secretary of State needed no independent power of set-off.

3. The repeal of section 190(3) did not apply retrospectively to the dismissals. The transitional provisions reinforced the ordinary presumption against retrospectivity. Although domestic legislation should, so far as possible, give effect to Community rights, that principle could not be used to deprive private parties of clear domestic-law protection where the relevant directive lacked horizontal effect.

4. Council Directive 80/987/E.E.C. did not apply to this administrative receivership. The private appointment of receivers by a floating-charge holder involved neither a request to an authority to open proceedings nor proceedings directed towards collective satisfaction of creditors. The domestic guarantee’s extension to administrative receiverships lay wholly outside the directive and was a purely domestic remedy. Community law could not enlarge the Secretary of State’s liability beyond domestic law.

5. The £205 weekly ceiling imposed by section 122(5) was not unreasonably low. Lord Hoffmann considered that the Secretary of State could take account of matters besides average earnings when reviewing the ceiling. In any event, the directive did not apply to the receivership, so it imposed no obligation to pay more.

6. Section 122(3)(a) was enacted to implement the directive and had to bear the same meaning in cases within and outside its scope. The eight-week limitation was to be construed restrictively so as to afford the maximum protection consistent with that limit. An employee could therefore select the eight most favourable weeks. The Secretary of State could assume, absent a contrary request, that the employee accepted the normal chronological calculation. No employee had requested particular weeks, so the issue did not arise on the facts.

1. House of Lords: Dismissed the employees’ appeal unanimously. It upheld the result reached by the Court of Appeal, principally because Council Directive 80/987/E.E.C. did not apply to an administrative receivership.

2. Court of Appeal: Reversed the Employment Appeal Tribunal. It held that the protected period fell outside the periods for which the directive required a guarantee.

3. Employment Appeal Tribunal: Held that applying the statutory set-off to the claim against the Secretary of State was contrary to Community law.

4. Industrial tribunal: Made a 90-day protective award against the insolvent employer following the dismissal of 408 employees without consultation.