TUPE Transfers and Administrations

A new ruling in OTG Limited v Barke and others, by the Employment Appeal Tribunal has provided guidance departing from the EAT`s ruling in Oakland v Wellswood (Yorkshire) Limited in respect of administrations and dismissals. Previously the position had been that where a company had entered into administration and there was a business transfer, the tribunal would examine if the administration was with a view to liquidation. If it was with a view to liquidation, dismissals in connection with the transfer could be fair. Now the EAT has decided that if administration proceedings are commenced, then the administration  proceedings cannot be regarded as being "bankruptcy proceedings", and therefore dismissals in connection with the transfer will be automatically unfair.   

 

It needs to be noted that this is not the view of a higher court, the Court of Appeal, but a subsequent decision of the EAT. However given that this is the more recent decision of the EAT, the likelihood is that this ruling will be followed.

The background to the case is that under the Acquired Rights Directive, transposed into TUPE 2006, regulation 8(7) states that where the transferor is the subject of "bankruptcy proceedings or any analogous proceedings which have been instituted with a view to the liquidation of the assets of the transferor" the employees will not automatically transfer to the transferee.  However under regulation 8(6) of TUPE 2006 if there are relevant insolvency proceedings "which have been opened in relation to the transfer not with a view to the liquidation of the assets of the transferor..." then the employees will transfer to the transferee under regulation 4 and receive unfair dismissal protection. Essentially the court reached the view that administration proceedings can never attract regulation 8(7).

The OTG case was one of five cases decided before the EAT. Where a tribunal in respect of the case had arrived at an incorrect ruling on the basis of application of the Oakland test the case was remitted to the tribunal.

In summary the case provides certainty that where an administration has commenced, even in a situation of a pre-pack administration, dismissals in connection with the transfer will be automatically unfair.