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Administration: Rangers’ fans hold their breath – but what about Rangers’ employees?

The potential collapse of Rangers Football Club is a surreal prospect for fans of Scottish football. As things stand it seems incredible that Rangers will do anything other than live to play another day. The latest from the administrators is that they are confident the club will continue “in broad terms”. What that means for the fans and for the future of Rangers and Scottish football generally we shall have to wait and see; but just what are the implications for all the people Rangers currently employ?
Unlike other types of insolvency proceedings, employee’s contracts of employment are not automatically terminated when a company goes into administration. However, administrators are appointed to act with the creditor’s best interests at heart and that means they will be looking to cut costs wherever possible. It is highly likely if not inevitable that staff will be affected. At a press conference yesterday we heard from the administrators that whilst no decisions will be made until a staffing review is complete – no-one is off limits.
When we think about the employees of Rangers Football Club we automatically think about the players. The hefty footballer wage bill will no doubt be under scrutiny so fans may see changes to the starting line up as soon as next week. The administrators have a particular incentive to cut down on staffing costs quickly because if after 14 days employment contracts are adopted, the wages payable under those contracts take priority over the administrators’ own fees and expenses. If the administrators are concerned there is not enough money in the pot to cover the wages, they won’t keep the staff and players on after the 28th of this month unless they know they will find a buyer to pick up the tab. Of course a club the size of Rangers employs a large variety of different people behind the scenes too. Sadly, the fate of the less well publicised employees’ contracts of employment and any payments they may be entitled to under those contracts are also hanging in the balance sheet.
If the administrators do dismiss employees within the first 14 days, although Rangers will be liable for any payments owed to its employees, the employees could face great difficulty recovering anything at all from the club. Claims for sums due such as wages, redundancy pay, and compensation for unfair or wrongful dismissal are unsecured claims which means that employees have to stand in line behind other creditors and may end up with nothing at all. The National Insurance Fund will reimburse employees in relation to some outstanding payments subject to maximum rates and limits, but highly paid staff such as footballers will see reimbursement of but a proportion of the sums potentially owed to them. 
If the club can be sold as a going concern the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE regulations”) will likely take effect to preserve the continuity of employment of those staff employed immediately before the club is transferred to its new owner. If a new owner is found this means that the employees have a little bit more protection, although the prospect of redundancy or changes to terms and conditions of employment still loom. 
The TUPE regulations apply to protect employment rights for employees in most situations where a business is transferring in whole or in part to a new owner. Normally all the liabilities of the old employer transfer to the new employer. However, the law recognises that where a company is in administration a potential new owner may be disinclined to step in and save a business if it will inherit liability for payments owed to staff. As a result, the TUPE regulations make an exception in business transfers arising from an administration so that although liability for contracts of employment transfer to the new owner, some liabilities remain with the old employer (e.g. statutory redundancy payments, payments in lieu of notice and unpaid holiday pay). Remaining liabilities pass to the new owner so if someone steps in to save Rangers they will want to do their sums in advance. Having said that, it is a little easier for new owners in these situations to make changes to terms and conditions of employment which otherwise under the TUPE regulations could be a little more complicated. Do we think any Rangers players will be up for a wage cut? We’ll have to watch this space.
Ultimately, Tuesday’s announcement that Rangers Football Club was to go into administration cast a shadow over the future of the club. We will no doubt hear all about the fate of the players, but the ordinary employees of the club have the fate of their team and their livelihoods to think about too. Let’s hope that for as many of the employees as possible, a ten point deduction for their team is all they lose out on in the long run.
For further guidance relating to Employment Law please contact Robert Holland