Written by: Keith Tully
Reviewed: Thursday 12th February, 2015
The Insolvency Service is to investigate the details of a pre-pack administration process involving a company called West Coat Capital (USC), which until recently owned and operated 28 fashion retail stores branded as USC outlets.
West Coast Capital (USC) is controlled by its parent company Sports Direct, which is now facing enquiries into how a pre-pack administration process relating to the business was handled last month. There are some concerns that pursuing a pre-pack deal was not the most effective restructuring option for the business, with decisions made by Sports Direct and its administrators now set to be scrutinised.
Of particular concern to investigators is the way in which 80 staff at a USC warehouse were made redundant after administrators were called in. There were around 200 people working at the relevant USC facility in Ayrshire, of which a majority were agency workers and not entitled to any amount of redundancy pay.
Administrators were initially called in to USC after one of its suppliers, the fashion brand Diesel, was left with unpaid bills. The business was immediately bought out of administration by Sports Direct’s Republic division, which already owned numerous USC stores around the UK.
The former USC warehouse employees have since sought legal representation to establish whether they might have been unfairly dismissed during the pre-pack administration procedure. Their claim is that they were not properly consulted on relevant matters and were made redundant 15 minutes after being given notice of a consultation process.
An employment tribunal is set to hear the case and could see the redundant workers, who lost their jobs, receive up to eight weeks’ worth of pay as compensation. These amounts will be payable by the Insolvency Service, with the situation as a whole potentially set to cost UK taxpayers in excess of £100,000.
“This is another example of where entrepreneurs engage in a pre-pack process and it seems the taxpayer is going to be carrying the can for payments for employees,” said David Martyn from Thompsons, the Glasgow law firm representing the former USC employees.
Sports Direct has found its practices coming under considerable scrutiny in recent months, with its founder Mike Ashley being invited to give evidence in relation to the collapse of USC to a Scottish parliamentary committee earlier this year.
The company has also recently been accused of unfairly excluding several hundred part-time staff members from an employee bonus scheme.