By Emma McClelland and Olivia Vicol - 12 April 2022
They say a phoenix rises from the ashes, ready to start again. We think of their resilience, their courage. But we rarely consider what those ashes are made of. Sometimes, they are made from the cinders of other people's hopes and the smouldering embers of broken trust. This is a story about phoenix companies, and the destruction they can leave in their wake.
Matais* is a Latin American man who moved to London in 2016. Like so many young migrants who are determined to make a future for themselves even when they are still struggling with English, he found a position in a cleaning company. The pay was minimal, the work was hard, but it was a start.
In early January 2021, outside of work time, Matais was a victim of a vicious attack and suffered a laceration to his hand. The police were called and gave him a much-needed lift to the hospital. He required surgery on his hand, which meant he wouldn't be able to work for a couple of months. This is where the trouble began.
Excuses to not pay sick pay
Far from being sympathetic, Matais' employer immediately accused him of being involved in criminal activity, despite no arrest having been made and the police only having given Matais a lift to the hospital as a courtesy. While at first this seems bizarre, a more sinister motive was soon to emerge.
Matais realised that the accusation of 'criminal activity' was a convenient way for his employer to get out of having to pay him any sick pay! At this point, Matais was owed around six weeks' worth of wages and was shocked when, the following day, his employer also alleged: "We've had a complaint about how you clean and you won't be getting paid until we've carried out an investigation". Then he blocked Matais on WhatsApp and refused to reply to any form of communication.
The company evades justice
With our help, Matais contacted ACAS and obtained the certificate needed to go to the employment tribunal. The employer didn't show up and, in September, the tribunal returned a default judgement in Matais' favour, giving him everything he was owed: a little over £1,000 in unpaid wages.
The route to reclaiming sick pay was more complicated. Because his employer never told him whether he was still employed or not after the sham investigation, Matais wasn't sure of his employment status. We contacted the statutory dispute team and were shocked at what happened next.
A forged resignation
The dispute team, it transpired, had received a resignation letter, in Spanish, allegedly sent from Matais to his employer two weeks before his accident. In shock, Matais revealed that he'd never sent any such letter. In fact, he suspected that the company's other employee, a Spanish speaker who was a friend of the employer, contributed to the forgery.
We appealed the decision, submitting the evidence that he was given a positive judgement for his unpaid wages, and making it clear that the letter they received had been forged. This is currently under investigation. Meanwhile, Matais was still far from getting any concrete justice.
Justice on hold
After the tribunal decision, we waited for a response from Matais' employer. According to the tribunal judgement, the company should either pay him the money, or appeal the decision. It did neither, so Matais paid £60 for bailiffs to go round to the company property to seize the employer's assets.
Shockingly, the bailiffs discovered that there was no-one at the address, and nothing there worth seizing. The business, they noted, had around £800 in unpaid debts, indicating that they were insolvent (or were about to be). They advised Matais that he had less than a 50% chance of recovering the money he was owed. This is where the dark side of the phoenix company truly revealed itself.
Running out of options
We looked into whether the employer had other companies and assets. He had one small business, but it had been insolvent since last year. Running out of options, we tried to retrieve the money through the National Insurance Fund, which allows employees to claim their payments, statutory or otherwise, from insolvent employers. By that point, they informed us the company had been dissolved, which meant Matais was now ineligible to claim his money through that Fund.
We have tried all we can over the course of 14 months of casework, consulting with employment lawyers, to find an alternative route for Matais. The only remaining option is to take the employer to court for 'phoenixing'. This is the practice of carrying on the same business successively through a series of companies, when each becomes insolvent in turn. Its assets are transferred to the same directors, now at the new company (often for below market rate or for nothing) but its debts do not. Trying to challenge this legally requires time, money and legal expertise, which Matais cannot access.
We cannot allow phoenix companies to continue to evade justice
When we come across the stories of businesses going into insolvency, it's often big corporations with mostly British employees that make the headlines. Under public and regulatory scrutiny, they are pressed to do the 'right thing' by their staff. But, when it comes to smaller businesses hiring people who often don't speak English, accountability can be easier to evade. The Insolvency Service cannot investigate complaints about employee's wages, or the payments of individual creditors. People like Matais are left to fend for themselves.
Matais has another job now and has gone through physical therapy to help him recover from his injuries. But his story shows the disappointing truth that exploitative employers can act with impunity, submit a forged letter to a government body and face no consequences. And when they start another company, it will rise from the ashes of the lives of those like Matais. He, and countless other workers scammed by phoenix companies, deserve better.
*Name changed to protect anonymity
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