Regulation 7 of TUPE states that a dismissal will be automatically unfair if the main reason for dismissal is the transfer itself, or a reason connected with the transfer that is not an economic, technical or organisational reason entailing changes in the workforce (‘ETO reason’). This provision has caused some uncertainty where employees are dismissed by an administrator in order to make a business more attractive to a prospective (but as yet unknown) purchaser.

The TUPE Regulations contain some provisions designed to make struggling businesses more attractive to prospective purchasers. TUPE will not apply to transfer employees, and dismissals will not be automatically unfair, where insolvency proceedings have been instituted with a view to liquidation of assets (Regulation 8(7)). However, TUPE will apply to insolvency proceedings which do not aim to liquidate assets, and employees will have unfair dismissal protection (Regulation 8(8)).

In another case involving administrators, an employment tribunal somewhat controversially has held that the individual administrators could be liable as principals in an agency relationship with employees of a company in administration.

Where a company goes into administration and the administrators sell on part or all of the business the question arises whether accrued employee liabilities will pass over to the buyer, who may inherit an unexpected list of old debts.

Regulation 8(7) of TUPE 2006 attempted to mitigate the effect of TUPE in the case of certain insolvencies. Mirroring the wording in the Acquired Rights Directive, it provides that contracts of assigned employees (with their accrued liabilities) will not pass to the buyer where the transferor