Insolvent Employers and the TUPE Regulations

A recent Employment Appeals Tribunal case has clarified the situation for staff who would normally transfer under TUPE, where a business is sold by administrators through a pre-packaged deal. In effect, the transfer does not occur automatically. The employee was a director and a 50% shareholder in the company which, in 2006, went into administration. Later that year, the sale of assets to a new employer took place and the employee transferred under the Transfer of Undertakings (Protection of Employment) Regulations 2006.

In November 2007, the employee was dismissed and brought a Tribunal claim for unfair dismissal. The (new) employer argued that the employee had not completed the necessary year’s continuous service in order to bring such a claim. The Tribunal agreed, basing its decision on Regulation 8(7) of TUPE so that, regardless of the employee’s status with his first employer, he did not have sufficient service to bring an unfair dismissal claim. The employee’s appeal to the EAT was dismissed.

The Tribunal’s construction of the TUPE Regulations accorded with the policy behind Regulation 8(7); namely, the “rescue culture”, whereby a purchaser was not put off by the effects of the transfer of undertaking protection. The outcome was that some jobs were preserved and the creditors benefited from the best available option. (Oakland v Wellswood)

Jane Dismore
Director and Head of Employment Law Services


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