With business insolvencies projected to increase in 2026, it is essential for insolvency practitioners to adopt effective strategies for handling employment tribunal litigation.

Published: 28 January 2026

Moratorium on legal proceedings

Upon administration, a statutory moratorium prevents the initiation or continuation of employment tribunal proceedings against the company without the administrators’ consent or a court order. This moratorium aims to protect the insolvent estate for the benefit of creditors. Administrators typically refuse consent for legal proceedings unless it is in the creditors’ best interests. In most cases, it is preferable for claimants to submit their claims as debts in the administration rather than pursue litigation.

Employment claims and time sensitivity

Before and during an insolvency decisions regarding employees are often urgent, making comprehensive redundancy or TUPE consultations impractical. This urgency can result in claims for statutory redundancy payments, notice pay, and protective awards where collective consultation obligations are unmet.

Redundancy Payments Service (RPS) claims

The Redundancy Payments Service guarantees certain employment-related payments to employees of insolvent employers. However, for protective awards or the basic award for any unfair dismissal claims, payment from the RPS requires a tribunal judgment, creating a procedural challenge for employees. Administrators, in considering whether to provide consent, will also need to balance the interests of the individual employees against the interest of the general body of creditors and consider how such claim will impact their claims overall.

Securing tribunal judgments

To allow employees to access all the funds available to them from the RPS without impacting on the outcome in the administration for the general body of creditors and to make the balancing exercise easier for administrators a practical solution, recently endorsed by the Employment Appeal Tribunal, is for administrators to consent to tribunal claims where employees undertake that the sole purpose of their claim is to obtain a judgment for RPS recovery. This approach ensures that no further liability falls on the insolvent estate, satisfying the balancing exercise required for consent to breach the moratorium.

Use of consent orders

In our experience, consent orders, agreed between the parties, can expedite proceedings and provide more certainty as to costs and timings. These orders can specify compensation amounts, ideally capped at the RPS limit, and reduce tribunal involvement. This expedites the resolution of claims, allowing the administration to conclude more efficiently, as companies cannot be dissolved until tribunal proceedings are resolved.

Conclusion

While this mechanism may not suit all claims—particularly where employees seek more than the RPS provides—it offers a practical approach for all parties in appropriate cases.