City Link 'deliberately deceived' workers and firms

[TrueBlueTerrier]

City Link 'deliberately deceived' workers and firms about its financial troubles

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City Link deliberately deceived workers about the state of the troubled delivery business before it collapsed with 3,000 job losses, a committee of MPs has claimed.

In a report on the collapse of City Link, in which more than 3,000 workers lost their jobs on Boxing Day including 1,000 self-employed van drivers and agency workers, the Scottish affairs committee said that City Link and its private equity owners were “morally, if not legally, responsible for the difficulties that many individuals and small business now find themselves in”.

MPs said self-employed staff and contractors had been deceived by the company and owner Better Capital. The committee said the financial difficulties of the City Link contractors were exacerbated by the fact that they had been encouraged to take on additional staff and vehicles and to work longer hours in the runup to Christmas.

“We are dismayed that, although it was clear for some time there were serious questions over the ability of City Link to continue trading after December 2014, small businesses and self-employed drivers working for City Link were encouraged to take on additional costs despite a strong possibility that they would not receive payment for a significant part of their work in December,” the report said.

The report said City Link took a deliberate decision not to inform employees and contractors as to the true intentions and position of the company, and “this was done for the financial benefit of City Link and Better Capital”. It added: “This amounts to a deliberate deception by omission.”

The MPs called on the government to overhaul rules governing insolvencies to better protect agency and self-employed workers. At present insolvency laws provide protection for direct employees only, who receive redundancy payments from the government if the company cannot afford to pay them.

Self-employed workers rarely receive the money they are owed because they are counted as unsecured creditors and are paid if there is money left once debts owed to banks are settled. In the case of City Link, the company’s owner Better Capital was one of the first in line to be paid as it had provided a secured loan to the delivery firm.

“We accept that there will always be those who lose out when a company goes into administration and cannot cover all of its debts. We do not agree, however, that the current system, where those who have given secure credit to a company are cushioned from the full impact of an insolvency because of the losses borne by those who work for a company on a self-employed basis, or as contractors or suppliers, represents the appropriate balance,” MPs said in the report.

MPs also urged the business secretary, Vince Cable, to bring forward plans to tackle bogus self-employment. They accepted the analysis of the RMT union that many of those who were counted as self-employed at City Link were in fact direct employees “in everything but name”.

A spokesman for EY, the administrators of City Link, told The Guardian that information from company records, backed by legal advice, was that the self-employed contractors working for the delivery firm were not employees.

Jon Moulton, the founder of Better Capital, agreed that changes to insolvency rules should be carefully considered as the line between employment and self-employment was now “very close and you can now argue where that line should be placed”.

He denied that Better Capital had been involved in the deliberate deception of workers. “We didn’t say anything to them and had no contact with them,” he told The Guardian. “We tried everything we could to save those jobs and lost a lot of money in doing so.” He pointed the finger at the managers of the now collapsed company. “We were the shareholder and the loan provider; we did not run the company day to day,” he said.

In a statement, Better Capital described as “ill-founded” the accusation that the company had made a deliberate decision not to inform employees of City Link’s troubles. It said there was no financial benefit to City Link in continuing to trade between 22 and 24 December. Better Capital added that pulling the plug before 24 December, when there were still hundreds of thousands of deliveries to be made, could have exposed City Link and its unsecured creditors to compensation claims worth up to £10m.

“The company took a deliberate and brave decision to trade for the extra two days which it could only do if it did not announce its likely administration,” said Better Capital.

EY said its investigations into the conduct of the company directors’ conduct was ongoing and so it would be inappropriate to comment on the MPs’ conclusion that deception had occurred.

[POSTMAN]

My local Yodel dude,was in a City Link van today,everything but the City Link wordings.