Factory closures spark ‘claims farming’
27 November 2009
EXCLUSIVE The recession continues to take its toll on the manufacturing industry with mass redundancies and factory closures hitting hard across the country, writes Kieran Jones, a partner at Weightmans LLP
‘Claims farmers’ have as always, spotted the opportunity to encourage those made redundant to put in a claim against their former employers for work-related illnesses and diseases, such as hearing loss and upper limb disorders.
The recession continues to take its toll on the manufacturing industry with mass redundancies and factory closures hitting hard across the country. ‘Claims farmers’ have as always, spotted the opportunity to encourage those made redundant to put in a claim against their former employers for work-related illnesses and diseases, such as hearing loss and upper limb disorders. In some cases, these companies have even touted for business by leaving flyers on windscreens in industrial areas.
Perhaps a crude strategy but effective nonetheless; these companies target regions where hundreds or thousands have recently been made redundant (as with the closure of Visteon factories earlier this year, which prompted workers to stage a sit-in at the firm’s factories).
Those now out of a job and with little or no immediate prospects of getting a new one, and with depleted loyalty to their former employers are perhaps more open to persuasion than they would have been before by the prospect of a few thousand pounds in compensation. Whilst “claims farming” activity focuses on industries or geographic locations where redundancies are more prevalent this in turn raises awareness beyond the work forces directly involved and has resulted in claims being brought against employers previously not troubled by claims.
Where a factory is to be closed down there is a statutory duty to notify the DTI (where more than 20 being made redundant), there is then the consultation period, and invariably there will be a run-down period when manufacturing continues.
From a claims perspective, the risk is of course that employees remain in one location and can therefore make the job of those looking to identify potential claimants far more straightforward with the advertisement of potential claims being directly advertised or by means of word of mouth. It is crucial therefore that a proper consultation process is undertaken and that a redundancy package seeks to recognise the contribution that an employee has made to the business; such an approach may at least have the benefit of securing some of the loyalty referred to above.
Manufacturers having to make significant redundancies or perhaps close one or more factory sites must take steps to protect themselves against a potential wave of claims, and having all the information in place to defend these claims successfully is crucially important. There is a risk that upon closure of a site, relevant documentation is lost or destroyed, including personnel records identifying where for example an individual worked, noise and vibration assessments, asbestos registers, site plans etc.
Frequently redundant factories will be levelled fairly promptly once they cease to operate, and accordingly there may not be an opportunity to even inspect the working environment should claims be brought subsequent to the closure. It is therefore crucial that an audit is undertaken to identify all relevant documentation and information, that such documentation is identified and preserved not just for posterity.
The risk of future claims may be apparent at the time a closure is being undertaken and accordingly, it may be worthwhile securing generic information or evidence from appropriate potential witnesses dealing with areas of most perceived risk. If, for example, an asbestos removal project was undertaken at a site, then it may be worthwhile for an insurer with potential financial liabilities to invest time and money obtaining a statement from someone directly involved with regard to precautions taken etc.
Although there is an obvious potential risk that this type of strategy may alert employees to the opportunity to claim, doing nothing may leave a company in a position some years down the line of being faced with a barrage of claims left indefensible because of the absence of relevant documentation and information.
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