TUPE Does Apply to Pre-Pack Administrations
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22.7.2011
Regulation 8(7) of TUPE provides that where the seller is the subject of "bankruptcy proceedings or analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the seller", the employees will not automatically transfer to the purchaser, and dismissals by reason of the transfer will not be automatically unfair. This decision changes the EAT's stance as to whether a pre-pack administration can circumvent TUPE. Prior to the OTG case, the EAT in the case of Oakland v Wellswood (Yorkshire) Limited) held that whether or not regulation 8(7) applied to a particular transfer is a question of fact, and effectively depends on the intentions of the administrator. In Oakland, it held that pre-pack administrations constituted terminal insolvency proceedings, regulation 8(7) therefore applied and therefore there would be no TUPE transfer in these circumstances. However, in the OTG case, the EAT set out the following: - Although an administrator can liquidate a company's assets as a last resort, his or her primary objective is to rescue the company as a going concern. - The fact-based approach in Oakland was wrong. Administration can never constitute "analogous insolvency proceedings" under regulation 8(7) of TUPE; and this approach increases the likelihood of disputes as to who is liable for the seller¡¦s obligations, leading to cost, delay and uncertainty. - The purpose of the Acquired Rights Directive (from which TUPE derives) was to protect employees in the event of a transfer, and to ensure that their rights are safeguarded. The approach applied in Oakland leads to less protection for employees.
This bulletin is for general guidance purposes only and should not be used for any other purpose.
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