On September 29, 2020, the United States House of Representatives Committee on the Judiciary advanced a Democrat-backed bill to the full chamber that seeks to address perceived shortcomings in the Bankruptcy Code’s protections for employee and retiree benefits and to curtail the use of bonuses and special compensation arrangements for executives in bankruptcy cases.

The Worker Adjustment and Retraining Notification (WARN) Act in the U.S. requires that employers give sixty days’ notice to its employees before effecting a mass layoff.

The United Kingdom has voted to leave the EU. Before the referendum, we considered in detail the potential impact of Brexit in the context of restructuring and insolvency. In particular we highlighted that Brexit could have an impact on cross-border restructuring/insolvency given the UK is currently viewed as a popular jurisdiction for implementing complex cross-border restructurings and insolvencies in light the regimes being widely regarded as well established, flexible and creditor friendly.

The Employment Appeal Tribunal (“EAT”), in the case of Secretary of State for Business, Innovation and Skills v McDonagh, has had to consider what the “appropriate date” is for the purposes of employees claiming arrears of salary and holiday pay from the National Insurance Fund, in circumstances where a voluntary insolvency procedure is followed by a compulsory insolvency procedure.

The Court of Appeal has issued further guidance on the thorny issue of the application of the TUPE Regulations to administration proceedings.  While many practitioners will feel that the decisions are not helpful in trying to achieve business sales in what is already a challenging market, insolvency practitioners (IPs) nonetheless need to be aware of the clarity that these cases have brought. The key points to note are:

It’s been quite a week for important cases on TUPE and its operation in relation to administrations. The Court of Appeal has delivered two judgments which are of considerable importance for those contemplating and structuring transactions out of administration.

The key points to note are that:

The EAT has confirmed that it is not necessary for the eventual transferee to have been identified in order for an employee, dismissed in the run up to a transfer, to claim automatic unfair dismissal by reason of a relevant transfer under TUPE (Spaceright Europe Ltd v Baillavoine & another).

OTG v Barke is the latest case from the Employment Appeal Tribunal (EAT) to consider how the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) apply in the context of the sale of a business in administration. The case largely resolves the uncertainty in that context and affirms the general practice of administrators and purchasers of businesses from them.

Administrators will note with concern the decision of the East London Employment Tribunal in Spencer v Lehman Brothers (in administration) and Others, which suggests that administrators can be held to be personally liable for the discrimination of employees of the business in administration.

There are essentially three types of insolvency proceeding: liquidation, receivership and administration. Liquidators realise and distribute a company’s assets before dissolving the company. Receivers usually realise certain secured assets to repay certain debts, before appointing a liquidator. However, an administrator’s first objective is to rescue the company as a going concern. It is only if this is not practicable that the administrator can realise and distribute a company’s assets.