January 09, 2012
Employers facing financial difficulties have been told to take heed of a recent Court of Appeal decision which ruled that the provisions of the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) are not disqualified in the case of company administrations. According to ACAS, TUPE protects employees' terms and conditions of employment when a business is transferred from one owner to another. Employees of the previous owner when the business changes hands then automatically become employees of the new employer on the same terms and conditions. However, the transfer of employment and the automatically unfair dismissal provisions under TUPE may be modified when the transferred business is insolvent. According to the Court of Appeal, the extent to which TUPE applies in this situation depends on the nature of the original company’s insolvency. In the case of Oakland v. Wellswood (Yorkshire) Ltd (2009), the Employment Appeals Tribunal (EAT) decided that a company in administration was not exempted from the provisions of TUPE since the administration did not amount to proceedings “instituted with a view to the liquidation of the assets of the transferor”, as required under the Regulations. The Court of Appeal has since upheld the EAT’s decision, clarifying what has been an uncertain area of the law. This now means that companies undergoing a ‘pre-pack’ sale as a result of entering administration will not be exempt from complying with the provisions of TUPE. If you’re struggling to make sense of TUPE Regulations and how they may affect your business should you go into administration, contact our experts today.