Nortel Networks is a Canadian Blue Chip Company, the largest supplier of telecommunications equipment in the world and operates globally. On January 14th 2009 they voluntarily filed for Chapter 11 Bankruptcy protection in the United States Courts, CCAA in Canada and as a result entered Administration in the UK. The appointed Administrators were Ernst & Young (E&Y) who are now effectively running Nortel Networks UK Limited (In Administration). We will refer to this set up as “The Company”
It is a fact that, The Company has knowingly, on 2 separate occasions, broken UK employment law by denying nearly 400 UK employees the right to the required 90 days consultation, contracted notice period (or money in lieu thereof) and severance payments. The first action was Monday 30th March and the second the Tuesday 30th June. They gave no notice of these actions and in both instances have acted in an inhumane manner, displaying a complete lack of respect, integrity and ethics towards their workforce. All in contradiction to their published ethos.
The first redundancy was actioned in three simultaneous meetings at Maidenhead, Harlow and Monkstown (NI). Staff were given just 3 hours notice of termination of their contracts.
The E&Y representative in Maidenhead when questioned openly acknowledged that the Company had broken UK Employment law. She stated that there would be no compensation paid by the company, instead all employees were handed copies of documentation from The Insolvency Service on how to claim from the Government.
The Company failed to inform the DTI of this action until after the event. Yet the BERR (now BIS), once aware of this merely wrote to The Company to reaffirm previous written guidance to IP’s to act in a humane manner and abide by the law where possible, and to advise that it would take no further action. Even had the BERR taken action, the penalty for an employer failing to comply is a mere fine of just £5000 in total. In France and Germany, where employment law is taken more seriously, the penalty is a prison sentence.
On Wednesday 24th June 2009, in a separate action, 150 people received formal notice that they would be made redundant on the following Tuesday, 30th June 2009, just 4 working days notice. Again there was no consultation, no severance payment as per contract and no payment in lieu of notice. A further as yet unconfirmed number were dismissed on 7th July, in similar fashion. Responses received so far have been patronising and ineffectual, and the burden of severance payments and benefit support continues to fall on the UK tax payer.
Please be aware of the background to this issue. In a general broadcast to the workforce following the filing for Chapter 11, The Company gave employees categorical assurances that the terms of their employment contracts would not be changed and that The Company was seeking the courts protection to enable it to restructure its debts and business operations in the face of the general banking & finance crisis “to emerge leaner and stronger”. At this time the company had $2.3 Billion (US) in cash. As at June 30th 2009 this figure had increased to $2.5 Billion (US). The UK subsidiary had circa $400 Million (US) in cash. The board decided to act at that particular time because they had sufficient funds to implement a restructure without damaging the future of the business.
The Company is still trading and sending out strong assurances to their customers that it is a viable concern and it is still obtaining contracts for new work, including government work. The Company initially claimed that there were “special circumstances” preventing them from complying with the UK Employment law for consultation and for compensating UK employees, although when challenged, they have been unable to provide a satisfactory explanation to support this. It is a company that could have afforded to provide the statutory compensation for contracted notice and severance but has chosen not to. The burden for compensation has fallen to the UK tax payer. Their latest stance is that the fault lies in an apparent conflict between the Insolvency Act 1986 and Employment law.
When would a company in administration not be liable for compensating its’ employees, you may ask? The UK law seeks to address a balance between those companies that can pay and those that simply cannot because to do so would remove all available funds, impacting fixed creditors and other businesses and offer no hope of salvaging the business.
We contend that Nortel is not in the latter position. In February 2009 The Company petitioned the courts to sanction a bonus scheme. It was based on performance against specified business targets to be measured on a quarterly basis. The fund per quarter is circa $43 Million (US). The fund paid out and 8 senior executives shared $11 Million (US), a further $12 Million (US) went to 990 selected personnel as a retention incentive and the remainder to all other 25,000 employees. Approximately $9 Million was paid to approx 2000 UK employees. The funding necessary to have compensated the dismissed employees (based on average notice period of 3 months, service of 10 years and weekly salary of $1500) is circa $14 Million.
Normally senior executives would have taken bonuses in the form of share options locking them in to the success of their leadership but they elected to take cash instead. At the time the share price was less than 30 cents and falling. The equivalent in share options would have been approximately 45 Million shares. We question why they made this decision and its timing.
Service amongst those terminated ranged from 3 to 38 years. Among those who did not receive any compensation from the Company were a number of women on maternity leave who now have babies to support. In one instance the mother was the main wage earner, who now has to rely on state handouts.
Our colleagues in Europe will receive their statutory severance entitlement plus enhanced packages due to tighter employment laws and a willingness of their elected representatives to petition on their behalf. In France, after months of frustrated consultation with The Company, industrial action was taken including a threat to ignite gas canisters in the factory. The French Minister for Industry, Mr Christian Estrosi, has intervened and in addition to the statutory compensation already awarded it has been reported that they will receive an additional ex-gratis payment of up to $140,000 (US) (TBC). There are numerous news reports on this in the news media and on Youtube.
We believe that the UK employees are more pragmatic and do understand the nature of the current financial climate and that our expectations are tempered accordingly, merely wanting recognition of the deplorable way we have been treated and to receive nothing more than what is rightfully ours as prescribed by law, with contracts honoured, as promised by The Company at the start of the process. However the sense of outrage and injustice following the action taken by The Company in the UK should not be underestimated. We feel we have been seen as an easy target.
The severed ex-Nortel UK workforce have implemented peaceful protest outside two of Nortel's locations and those of Ernst & Young, the lobbying of MP's, participation in local radio news programmes and the BBC's Money Box programme (although they would not mention Nortel by name) and local newspapers in Monkstown, Maidenhead and Harlow. We are now lobbying parliament to address the very important underlying issues. These are namely;
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The apparent conflict between the IPs obligation to serve the fixed creditors first and their obligation to obey the employment law providing the requisite consultation and compensation;
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A very real danger that US type employment law is being introduced by stealth by companies such as Ernst & Young and as such may place an undue burden upon the UK taxpayer which the country cannot afford. Especially so when the firing company could afford to pay the statutory monies.
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A complete lack of the basic tenants of society of respect and dignity that, for anyone who loses their job through no fault of their own deserves.
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Our request to you reading this, is to challenge the government to redress the anomaly that exists between Insolvency Act and Employment law so that never again can an unscrupulous company hide behind apparent impunity, technicalities and spurious “loopholes” to the detriment of hard working, loyal, employees when there is sufficient company funding available so that they do not have to rely on the taxpayer to survive. We stress again that as a group we appreciate that not all insolvent companies can afford to pay full redundancy, but a company that has an increasing cash reserve of nearly $2.5 Billion and can afford to pay out bonuses surely does not fall in to this category.
Our issue is not with the fact that we were made redundant, but in the manner in which it was carried out. Again, if the actions carried out by Nortel and the Insolvency Practitioners Ernst & Young were allowed to become a precedent, it would have significant ramifications for the entire working population of the UK. We do not want other companies taking advantage of our weak un-enforced employment laws by using what we believe to be is a “Contrived Administration” to make loyal employees redundant and passing the burden on to the already over stretched UK Taxpayer.
Contact us at info@shameonyounortel.co.uk
Stop Press!!!
See the link to the ITN Channel 4 News item below:
See the link to the ITN Channel 4 News item below:
ITN Channel 4 News item reporting the lack of consultation by Insolvency Practitioners when making employees redundant in the UK. This news item highlights the Nortel case with Ernst & Young acting as the Court appointed Insolvency Practitioners.
Nortel UK - Severed Employees:
