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Carillion - Liquidation Update

15 March 2018

Sadly, you are all too aware that a winding up order was made against Carillion on Monday 15 January 2018 after the company collapsed with massive debts. Senior managers in accounting and professional services firm PriceWaterhouseCooper (PwC) were appointed by the Official Receiver as ‘Special Managers’ to assist with the liquidation.

 

Download a pdf of this newsletter:   Carillion - Liquidation Update

The purpose of the ‘liquidation’ is the sale of the closed company’s assets to pay the people and organisations to whom it owes money - its creditors. However, in Carillion’s case it has debts that run into billions of pounds, and the sale of its assets will go nowhere near to paying off its enormous debts!

As Carillion is in liquidation, the entire workforce will ultimately leave employment with the company and at that time will therefore be technically redundant. Formal consultation on the redundancies in the rail business began on 8 February as is required by law. A further meeting with trade unions and reps is scheduled for 20 February.

TSSA has received assurances from PwC TSSA that they have been trying to preserve jobs wherever possible and we are pressing for all available opportunities to transfer contracts held by Carillion to their customers or to new providers and to find buyers for the businesses carried on by them.

TUPE (Transfer of Undertakings Protection of Employment) Regulations

Normally, staff transferring to another employer would do so under the TUPE Regulations, and would have their service unbroken (which affects redundancy calculations amongst other things) and would continue on their existing rates of pay and contracts of employment.

However, if Carillion employees transfer to a new employer when rail contracts are transferred, PwC and Carillion has stated that given that Carillion is being wound up the TUPE Regulations will NOT apply. The law is largely untested in this area, but TSSA believes that is likely to be proved correct. However, employees will have the choice as to whether or not they transfer and regardless of whether or not they do so, and unlike a TUPE situation, they will be eligible for redundancy pay in such circumstances even if they transfer.

TSSA will of course make strenuous efforts to persuade any new employers to treat employees that choose to transfer as if TUPE applies.

Redundancy pay

It is most unlikely that employees will receive any entitlements to any contractual enhanced redundancy pay (or if they receive anything it is likely only to be a small part of what is owed); most likely, only statutory redundancy pay will be available and that must be claimed from the Insolvency Service.

Members can calculate their statutory redundancy entitlement at: https://www.gov.uk/calculate-your-redundancy-pay

Members can claim their statutory redundancy pay at: https://www.gov.uk/claim-redundancy

PwC and Carillion has stated that they will provide details of how to do this at the relevant time.

Understandably, many employees are actively seeking alternative employment. However, members should be clear that should they resign and leave before their agreed termination date under redundancy, they are unlikely to be eligible for any redundancy pay whatsoever.

TSSA is working to safeguard Carillion members

Members should be assured that TSSA is doing all the union can to safeguard their interests in these very difficult circumstances.

Most of our Carillion members are employed either directly on Network Rail contracts or in support of more than one NR contract. TSSA General Secretary Manuel Cortes has demanded that Network Rail takes in house those Carillion staff engaged in work in connection with Network Rail contracts, recognising the fact that Carillion is massively important to Network Rail, and is its biggest supplier receiving around 5% of the NR’s total spend.

Network Rail has agreed to underwrite the salaries of those employed in Carillion’s rail business engaged in NR contracts until 14 April; the agreement may be terminated with 4 weeks’ notice on either side, or can be extended. Network Rail has done this to protect itself against the consequences of work stopping on key contracts.

However, Network Rail has shown no sign of taking staff and work in house.

Rail business up for sale

PwC is currently engaged in seeking bidders for the rail business as a whole, although TSSA understands that they may also seek to divide the business and sell it off. TSSA believes that jobs will be better protected if the business is sold to one bidder. The bidding closed last week. Network Rail are obviously overseeing PwC in this process.

Oxford contract

TSSA has been advised that Network Rail has commenced ‘contingency planning’ discussions in case a sale cannot be achieved. The union is aware of moves to entice staff engaged in the Oxford contract to move to Network Rail – presumably as new entrants. It is rumoured that they will be offered fixed-term contracts. TSSA advice to members is to think very carefully before accepting such an offer, as it may seriously impact on their redundancy entitlements and future pay and conditions.

East London Line contract

Members may be aware that the TfL East London Line contract formerly run by Carillion has been awarded to Cleshars. However, it should be noted that this was subject to a rebid process prior to the liquidation of Carillion, and Cleshars were the successful bidder. Members affected by this transfer should contact the TSSA Helpdesk for advice.

 

TSSA calls for public ownership, and condemns sale of the rail business

Manuel Cortes has condemned the selling off of the rail businesses; he said: “It’s a huge error of judgement not to see the signs of failure and simply transfer one failing company into the hands of another company run on the same model - it’s as if Grayling’s learned nothing!

“The government hasn’t even investigated a public option and is rushing the sale to be sorted in just a couple of weeks!

“Why didn’t he bring the work in house giving our members stability and ensuring Network Rail have a consistent skillset for future infrastructure and maintenance projects?

“The government haven’t learned any of the lessons of the 2010 crash, they’re permanently on the edge of disaster. This decision is simply being led by Tory ideology, not sensible policy making. I can’t see how any of this will benefit our TSSA members.”

Pensions will take a big hit

Pensions have also suffered as a result of the liquidation. RPMI has advised those members in the Railways Pension Scheme (RPS) that a Pensions Protection Fund (PPF) assessment period may be confirmed as having started on the day the company was wound up - 15 January 2018. Members should not assume that they are currently building up any further benefits in the pension funds, and pension contributions are no longer being collected.

Importantly staff cannot assume that they are covered by the Carillion RPS section’s lump sum death-in-service benefits, and individuals may wish to make alternative life cover arrangements. Transfers into and out of the sections have also been put on hold.

The likelihood is that the PPF will assume responsibility for paying the pensions of staff going forward. Transferring to PPF provisions will have a significant impact on pension entitlements, especially for RPS members who have not reached the ‘Normal Retirement Age’ of 60 before 15 January 2018.

The compensation pension paid to members under the PPF who have not yet reached age 60 will only be 90% of that which would have been paid. This applies to members who have retired early and those who have yet to retire. And it is subject to a cap. Anyone retiring before 1 April 2018 at age 60 is capped at a maximum annual pension of £32,769 (before the 90% cap is applied) The rate increases to £33,099 from 1 April 2018. Both are subject to change as more and more pension funds are taken over by the PPF and the costs of providing pensions rise significantly.

Under the PPF, a lump sum payment is available as are other options about retiring early - general guidance is available at: https://www.ppfmembers.org.uk/~/media/Files/RETWeb_0315.ashx?la=en.

Once a compensation pension is being paid, then payments relating to pensionable service from 5 April 1997 will rise in line with inflation each year, subject to a maximum of 2.5%. So if inflation continues to run at current levels, the payments will reduce in real terms. Payments relating to service before 5 April 1997 will not increase at all.

Further information about the Pension Protection Fund can be found at: http://www.pensionprotectionfund.org.uk/Pages/homepage.aspx

Members should be aware that if they are already old enough to draw their pension, or if they become old enough before PPF formally assumes responsibility for Carillion pensions, they may be able to draw their pension without suffering any loss. RPS members should contact RPMI for further information on this.

Concerns have been raised following media stories that Carillion has not made its contributions to the pension funds. TSSA, other unions and the TUC have been assured that this is not true. Carillion and PwC are setting up a discussion forum with union pension specialists to deal with the pension issues.

Health Shield

Employees trying to make claims through Health Shield have had them rejected. PwC and Carillion are looking into this matter.

Help TSSA to help you!

TSSA is aware that some members are engaged in work in support of non-Network Rail contracts. It will help TSSA to help them if they could let TSSA Organising Director Steve Coe know if they are NOT working on Network Rail contracts - they should please indicate what work they are doing if that is the case. Steve can be contacted by email on coes@tssa.org.uk – alternatively, members can call the TSSA Helpdesk.

TSSA retains the services of a firm of financial advisers, and members will be given the opportunity to have suitable financial advice, particularly on pensions, as soon as the position becomes clearer.

Concerns have been raised that the subscriptions of TSSA members are being collected by PwC and Carillion through paybill deductions but will not be paid over to the union – this is currently being investigated.

TSSA members that currently pay their subscriptions by paybill deduction are urged to cease doing so, and safeguard their union membership by setting up a direct debit in order to ensure that subscriptions are maintained. Contact the TSSA Helpdesk for assistance with this.

Please let provide a personal email address and a personal mobile phone number to ensure that your union can continue to communicate with you should the company email account become unavailable to you.

Members can update their own details by setting up a MyTSSA login:https://www.tssa.org.uk/en/members-area/member-login.cfm

Regular updates will be available on the TSSA website, and on a special facebook page: https://www.facebook.com/TSSA-members-in-Carillion-1995083600739761/

If Carillion rail colleagues are not members of TSSA, members should talk to them about joining - they can do so on line at: https://www.tssa.org.uk/en/join-us/index.cfm

Background to the collapse of Carillion

TSSA is now working in conjunction with the TUC and other unions to continue to address wider issues and bad industrial practice associated with the collapse of Carillion to end the practice of public sector outsourcing.

Not only was Carillion a significant player in the rail industry but it was one of the biggest contractors working on government and public service contracts including the National Health Service and the military. Some 20,000 staff were left in the lurch when it went bust, and many sub-contractors relied on it for work. Shock waves reverberated across the construction industry in particular, it continues to be high profile political issue, and it is fuelling the debate about the role of outsourcing and contractors in the delivery of public services.

Carillion has been in financial difficulties for some time, and it now seems that the company’s bosses were guilty of serious mismanagement, with serious corporate governance issues now being exposed. It accumulated around £1.5 billion in debts and it is reported that its pension fund deficits exceeded £580 million.

Carillion’s financial difficulties were further exacerbated by financial speculators and hedge funds speculating on the company in a way that drove its fortunes down even further.

Whilst staff are bearing the pain of the collapse, others are doing very nicely! Carillion’s directors have continued to receive massive salary and bonus payments. The Official Receiver is investigating reports that Carillion changed its remuneration policy last year to prevent massive bonuses being paid to directors from being clawed back in the event of financial collapse. TSSA will continue to maintain the pressure to hold directors to account.

Even the Institute of Directors has expressed concerns about the gravy train still being enjoyed by Carillon’s directors. Former Chief Executive, Richard Howson, who stepped down after the profit warning is still set to receive a £660,000 salary and £28,000 in benefits until October 2018! The interim Chief Executive is on a salary of £750,000. The former finance director who left in September is due to be paid a salary of £425,000 until this summer. And Carillion executives trousered about £4 million in bonuses in 2017.

The Institute of Directors commented that effective governance was clearly lacking at Carillion, and there were questions about the oversight exercised by the Carillion board and the shareholders. No wonder Carillion’s executives were savaged when they appeared before a recent parliamentary select committee meeting, and were challenged to hand back their ill-gotten gains! One MP said the executives may talk about how sorry they are, but being sorry won’t help pensioners that will lose out, or subcontractors who will go out of business. There is no sign of contrition - like repaying their millions received in inflated salaries and bonuses.

PwC, is also doing very well out of Carillion! It is likely to receive around £50 million for liquidating the firm. Yet it was involved before Carillion’s collapse, with around 50 PwC personnel advising the Cabinet Office and helped to prepare government contingency plans to handle the fallout from the company’s failure. That work was estimated to be worth about £750,000 a week to PwC! PwC was also the advisors to the pension trustees, for which they will have been paid handsomely.

Blacklisting

Leaked documents have confirmed that Carillon has a sinister reputation as a major supporter of an illegal blacklisting outfit targeting safety activists and trade union reps.

The firm has been linked to blacklisting for years. The Scottish Affairs Select Committee in 2013 publishing evidence about how Carillion liaised either directly with blacklisting agency the Consulting Association, or via its subsidiaries. Six managers directly involved with the association were named in the document. Subsequently, the GMB union estimated that from October 1999 to April 2004 Carillion checked at least 14,724 names against files illegally held by the covert blacklister.

Invoices and sales book records, seized by the Information Commissioner’s Office during a raid in 2009, showed that Carillion paid £37,814.72 to the Consulting Association between 1999 and 2006. This month ‘The Canary’ obtained the Consulting Association’s entire set of ledgers, which confirmed Carillion’s routine payments in return for data from the Consulting Association’s files.

In May 2015, Carillion, together with several other construction companies, agreed on a payout of around £80m in compensation to almost 800 blacklisted workers.

 

…and finally

You can be assured that your union will leave no stone unturned as we continue to press for justice for our Carillon members now and in the future.

Please ensure that you maintain your protection by remaining in membership of TSSA, and also that you keep your subscriptions up to date.

Please do not hesitate to contact me personally with any information, concerns, or suggestions you may have.

 

In solidarity,

Steve Coe, TSSA Organising Director

19 February 2018

 

Please contact me by email at coes@tssa.org.uk

 

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