Key2Law (Surrey) LLP -v- De' Antiquis [2011] EWCA Civ 1567
The Court of Appeal issued its long-awaited Judgment in the case of Key2Law (Surrey) LLP -v- De' Antiquis, confirming that businesses which are in administration are not exempted from TUPE.
The Court of Appeal has held that a transfer on an administration cannot be caught by TUPE rules, unlike on insolvency proceedings. As such administrations will not be “insolvency proceedings” for the purposes of the exemption to TUPE.
What does this mean?
Businesses who purchase companies who have been placed into administration will take on the liability under TUPE for the company’s employees. Employees will transfer under TUPE and will be protected from transfer- connected dismissals.
What should employers do?
The Court of Appeal has clarified in the case of Key2law (Surrey) LLP v Gaynor De’Antiquis [2011] EWCA Civ 1567 that administration proceedings do not constitute “insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor” in terms of regulation 8(7) of the TUPE Regulations 2006 and therefore fall outside the scope of regulation 8(7).
The Court of Appeal has resolved conflicting decisions at EAT level and confirmed that dismissals which are connected with a subsequent TUPE transfer can be automatically unfair under TUPE even where no specific transfer or purchaser is contemplated at the time of dismissal.
The Court of Appeal has held in the recent case of Spaceright Europe Ltd v Baillavoine and another (2011) that a dismissal can be for “a reason connected with the transfer” under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) even if there is no particular transfer or transferee in existence or contemplation at the time of the dismissal. In the case Mr Baillavoine, the Chief Executive of Ultralon Holdings Ltd (“Ultralon”), was dismissed on the day Ultralon was placed into administration.
In the recent case of Pressure Coolers Ltd v (1) Mr J Molloy; (2) Maestro International Limited; and (3) Secretary of State for Trade and Industry, the Employment Appeal Tribunal had to decide who should pay an employee’s basic award and notice pay following his unfair and wrongful dismissal after a “pre pack” TUPE transfer from his insolvent employer.
In a judgment issued in test cases, OTG Ltd v Barke and others, the EAT held that administration proceedings are not capable of coming within the insolvency exception to the normal business transfers rule.
Important news for those buying a business out of “pre-pack” administration. The Employment Appeal Tribunal (EAT) in Pressure Coolers v.
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.
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).