Royal Mail could be forced to pay several million pounds in compensation amid accusations that it flouted employment law in its restructuring of the Post Office network.

The organisation's Post Office division is being taken to an employment tribunal by the Communication Workers Union (CWU), on behalf of 1,300 employees who worked for Crown Post Offices that were franchised to WHSmith and other organisations.

The CWU says that the workers were told that they could take redundancy or be redeployed to other Post Offices, but not that they were entitled under law to transfer to the new owners of the offices under the same terms and conditions as they enjoyed at the Post Office. Crown offices are the larger high street branches that are directly managed by Royal Mail, as opposed to the small branches that are run as individual businesses. The union's claim will be heard at a tribunal in London in May. The CWU is asking for 13 weeks' payment for the workers, averaging £5,000 each.

The claim for compensation on behalf of the workers, which could total £6.5 million, emerged as MPs on the Commons Business and Enterprise Committee held an inquiry into the closure of up to 2,500 Post Offices. Peter Luff, chair of the committee, asked Alan Cook, the Post Office's managing director, to provide evidence of the communication to the employees. He said: “We would like further details on this, because I can't see how this complies with the law.”

Mr Cook told the committee that the employees had been offered a continuity payment to improve morale as the transfer of ownership and branding was completed.

Royal Mail has faced a wave of protests as it has tried to implement the 2,500 branch closures agreed with the Government. The organisation had wanted to cut far more offices to restore profitability, but ministers were concerned about the social consequences from large- scale closures.

Last summer a row erupted when the organisation sent a letter to sub- postmasters saying that they would not receive full compensation if they campaigned against closure. The letter was withdrawn and Mr Cook apologised.

Mr Cook told the committee that the closures were essential to restore the financial viability of the organisation. He said that the network needed “a dramatic turnaround” and that business recoveries came from

“increasing revenue or reducing costs. The unusual thing about this challenge is it needs both.” The network is trying to reduce costs by £270 million over five years.

The issue flared as the Court of Appeal upheld a £9.62 million fine on Royal Mail imposed by Postcomm for failing to protect mail that went astray. The problem was highlighted in a Channel 4 television investigation.

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