In Crystal Palace FC v Kavanagh the Court of Appeal has decided that liability for staff dismissed by the administrator before the sale of the club did not pass to the buyer under TUPE.

In Crystal Palace FC Ltd v Kavanagh & Ors [2013] EWCA Civ 1410, the Court of Appeal considered whether dismissals made by an administrator to keep a business alive with the ultimate aim of selling it were automatically unfair under TUPE, in which case liability would pass to the buyer. 

Comment

It is a fact of life that whatever goes up will normally come back down (but not necessarily vice versa). Nowhere is this more keenly felt than in the world of British football, where those clubs that just about stay in the Premier League reap riches that would be the envy of Plutus, Ancient Greek god of wealth, and those that drop out face a desperate chase for money simply to stay afloat.  

Summary

Introduction

Although distressing for the owners and employees, an insolvent businesses can represent an opportunity for a buyer. One of the benefi ts of insolvency is that it can release the underlying business (which may be profi table in itself) from debts and give a buyer the opportunity to make a fresh start.

In doing so, however, buyers should beware of the employment law risks represented by any employees who remain in the business through the insolvency process.

The Acquisition

Following the announcement that Crystal Palace Football Club had gone into administration in January 2010, the club's administrator wanted to sell the club as a going concern. Shortly after he  signed a sale and purchase agreement with the newly formed Crystal Palace Football Consortium (CPFC) he discovered that the club had severe financial problems and decided to 'mothball' the club during the out of season period, in the hope of selling it in the future. However CPFC then decided to withdraw its offer for the club and on 28 May 2010 the four claimants were made redundant.

Regulation 7(1) of TUPE usually makes a dismissal automatically unfair if it is for a reason connected with the business transfer. But what if the reason for the dismissal is actually good old personal dislike and the transfer is just the context in which it surfaced?

An employment tribunal has recently confirmed that employees who have been unfairly dismissed from an insolvent employer can bring an action against a connected successor company.

The tribunal held that there was a ‘commonality of ownership’ between the original and successor companies and that it was correct as a matter of public policy that employees should be able to sue the newco born from the ashes of the insolvent company.

Understanding the rights of your employees in redundancy is an important part of any insolvency procedure. Here we look at what happens during various administration and liquidation processes, plus the way in which redundancy entitlement is calculated.

Staff redundancy following liquidation