A recent case affects what happens to employees and dismissals where a business or part of it is sold by an administrator. The case is OTG Ltd v Barke and others UKEAT/0320/09 and other cases.
The Employment Appeal Tribunal (EAT) has gone against its earlier decision in Oakland v Wellswood (Yorkshire) Ltd, and decided that administrations cannot be "bankruptcy … or … analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor" within the meaning of regulation 8(7) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).
This means that where a sale of an undertaking by an administrator amounts to a "relevant transfer" for the purposes of TUPE, the employees who are assigned to that undertaking will transfer to the buyer and be protected against dismissal for a reason related to the transfer.
This applies whether or not the sale is by way of a "pre-pack" arrangement. Oakland had said that TUPE did not apply to pre-packs in this way.
But, the administration will be "relevant insolvency proceedings" for the purposes of regulation 8(6) of TUPE. That means certain liabilities in respect of the affected employees will be taken over by the Secretary of State rather than pass to the transferee. It also means that the new owner of the business will have more scope than usual to agree variations to the terms of employment of the transferring staff.
This latest case means that there are two conflicting EAT decisions on the point. The latest case, though, (OTG Ltd) was in fact a group of cases heard together and it is thought that Employment Tribunals will most likely follow that case.
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