EAT: No basic award without Tribunal decision; permission to appeal granted

Image of Matt Jackson and Imogen Brown

The Employment Appeal Tribunal has today handed down its decision in Chaudhry v. Paperchase Products Limited [2025] EAT 181, addressing a significant question for employees whose employers become insolvent during live unfair dismissal proceedings. Matt Jackson and Imogen Brown represented the Appellant on appeal, instructed by Gowling WLG on behalf of the Free Representation Unit. Imogen and Matt have successfully sought permission to appeal to the Court of Appeal, which was simultaneously granted by the EAT.

Mr Chaudhry, formerly employed by Paperchase, sought to recover a basic award for unfair dismissal from the Secretary of State following his employer’s insolvency. The difficulty for Mr Chaudhry was that his employer had become insolvent before his unfair dismissal claim reached trial. Was he still entitled to a basic award?

The EAT confirmed that, under Part XII of the Employment Rights Act 1996 (ERA), an employee cannot recover a basic award for unfair dismissal from the Secretary of State unless an employment tribunal has first made such an award at a final hearing. Despite arguments that the EU law principles of effectiveness and non-discrimination require the relevant sections of the ERA to be read differently, the EAT found the statutory language was incapable of any other meaning without going against the grain of the legislation.

While the judgment acknowledges that the current legal framework may make it excessively difficult for some employees to exercise their rights, and also discriminates against different categories of employee, the EAT concluded that it is bound by the wording of domestic legislation. The appeal was dismissed, but the judgment encourages insolvency practitioners to consider consenting to tribunal proceedings where the sole purpose is to obtain a basic award for recovery against the Secretary of State.

This decision provides clarity on the limits of employee protection in cases of their employer’s insolvency. Claimants would be well-advised to think tactically about how they run their unfair dismissal claims if their employer’s insolvency is a possibly. In particular, it may be that lodging a claim in a tribunal region with fewer listing delays means that an employee will be able to recover a sum that they would otherwise be barred from recouping. 

The judgment can be found here.