Thomas Cook (founded in 1841) and being one of the oldest and well-known holiday brands has “ceased trading with immediate effect.” This note will examine the legal effect on both employees, customers and suppliers of Thomas Cook.
How does the insolvency of Thomas Cook affect its employees?
There are many different types of insolvency such as; administration, liquidation, bankruptcy, receivership, company voluntary arrangement, individual voluntary arrangement and a debt relief order.
Employees may be able to claim from the insolvency fund operated by the government for:-
- a redundancy payment;
- holiday pay;
- outstanding payments e.g. unpaid wages, overtime and commission; and
- money you would have earned working your notice period (‘statutory notice pay’).
The statutory redundancy payment will be recovered from the state guarantee fund (the National Insurance Fund) and employees may obtain payment of certain ‘guaranteed debts’ from the National Insurance Fund.
The Civil Aviation Authority (“the CAA”) announced today that Thomas Cook has gone into compulsory liquidation. As the company will not continue to trade, it is likely to make employees redundant. We advise employees not to resign and to wait to be contacted by the “insolvency practitioner” (who is the person who will deal with the insolvency). Employees are likely to be eligible to claim for monies due to them. They should provide employees with a “RP1 fact sheet” and a ‘CN’ (case reference) number to use when an application is made for money owed. Once a reference number has been obtained, any claims of the above nature can be made under Section 184 of the Employment Rights Act 1996 Employees may also make a claim to the Employment Tribunal for compensation if they believe they were dismissed unfairly (known as a “basic award”) or not consulted properly (a “protective award”).
Statutory sick pay, maternity, paternity and adaptation pay will be recovered from the HM Revenue and customers (in substitution of the employer). There is some security for pension contributions, and the Board of the Pension Protection Fund may have a duty to assume responsibility for a pension scheme, and to pay compensation.
We therefore suggest you collate all your pay debts and other papers to assist in lodging a claim.
What about the impact on customers?
The UK government is currently launching one of the biggest peacetime repatriation in history, as British tourists fear being stranded across the globe. The CAA will launch a repatriation, which is estimated to cost approximately £600 million, taking up to 3 weeks. However, not every customer will be eligible to be covered under this scheme and all avenues should be explored (as set out in more detail below).
Atol Insurance (Air Travel Organiser’s License Insurance)
Atol protects you when you book a package holiday with a UK travel company. It ensures that you don’t lose the money you paid out or become stranded abroad if your travel company collapses. If an Atol protected travel company ceases trading, the scheme protects customers who have booked holidays with the firm. The Atol scheme is run by the CAA and it will publish instructions on its website (caa.co.uk) as to how passengers should go about making claims.
Package holidays are protected under the Atol scheme, therefore passengers will be able to claim for a refund and all future bookings will be cancelled. Flight only bookings are not covered by Atol, but some credit card customers should try claiming back any extra costs under Section 75 of the Consumer Credit Act. Further details set out below.
The repatriation scheme being prepared by the CAA will cover thousands of tourists stranded abroad. It will enable them to finish their holiday and then be flown home. The cost of hotel accommodation will also be covered. Any outstanding balance on a hotel booking, except extras signed for while staying, will be covered by the CAA.
Consumer credit rights
If you have a future booking and have paid more than £100 on a credit card, you should be able to get your money back under the Consumer Credit Act 1974. The refund you’re claiming back for must be between £100 and £30,000. To make a claim, contact your credit provider customer service and advise them that you intend to make a claim under Section 75. This claim needs to be done within 120 days from the date of the insolvency.
If the flight is booked on a debit card (or on a credit card and is less than £1000), it is possible to try recoup the money using a scheme known as “the chargeback scheme”.
For future holidays, you should consider the following:-
- Firstly ensuring they have good travel insurance in place;
- Pay by credit card; and
- Book a package holiday.
If as a customer you not covered by any of the above you should investigate what insurance cover you have.
The starting point is to check whether you have travel insurance that includes the event of insolvency.
Most insurer policy wordings will have excluded such an event with a clause on the lines of the following:
“Any claim arising as a result of the default or financial failure of any transport or accommodation provider, of any agent acting for them or of any agent acting for the Assured or Insured Person.”
You should request a copy of the policy wording from your Travel insurance provider if you are told you are not covered.
How will the insolvency affect suppliers of Thomas Cook?
This depends entirely on the contract in place with the supplier. For example, airports impound aircraft for landing fees.