Now we know for sure where we are with TUPE and pre-packs
Friday 18th February 2011
The long-awaited decision of the Employment Appeal Tribunal (EAT) in OTG Ltd v Barke and others marks a change in the EAT's approach towards Administrations and the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).
In Oakland v Wellswood (Yorkshire) Ltd, the EAT concluded that the Administrator had clearly been appointed "...with a view to liquidation of the assets of the transferor", and, having made that finding of fact, held that, under Regulation 8(7) of TUPE, the employees of the company in Administration, and liabilities relating to those employees, did not automatically transfer to the buyer. The decision in Oakland surprised many practitioners, as it went against guidance issued by the Department for Business, Enterprise & Regulatory Reform, and what tended to happen in practice.
In OTG, a differently-constituted EAT recognised that "...there is in the case of an insolvency-related transfer a tension between safeguarding the rights of individual workers, namely those who are liable to be dismissed or have their terms downgraded on a transfer, and the interests of the workforce more generally... but the Directive chooses not to allow the rights of the employees to be trumped altogether..."
The EAT decided that Administrations (including pre-packs) are not capable of constituting "bankruptcy proceedings or any analogous insolvency proceedings... instituted with a view to liquidation of the assets of the transferor" within the meaning of Regulation 8(7) of TUPE. This means that the normal TUPE principles will apply to a sale by an Administrator, including that the employees will transfer to the buyer.
Comment
The panel in OTG included the President of the EAT. Whilst there are now two apparently conflicting decisions of the EAT on the same point, it is likely that the decision in OTG will be followed in practice.
[Click here for more details of the decision in Oakland v Wellswood].
For further information, please contact:
Insolvency
Alan Bennett
David Pomeroy
Employment
Charles Pallot
