With the number of Insolvent Administrations increasing by 6% in 2011 some certainty as to the interplay of the Insolvency and TUPE laws is welcomed by Insolvency Practitioners, employees and purchasers of businesses alike.
In De Antiquis v. Key2Law (Surrey) LLP the Court of Appeal decided that a dismissal of an employee would be automatically unfair where that dismissal was solely in connection with the transfer of a business through Administration. A purchaser would not be able to rely on the protection in Regulation 8(7) of the TUPE Regulations.
Regulation 8(7) provides that where the objective of the insolvency is the liquidation of the assets, then any dismissal will not be unfair and there will be no claim against the purchaser for unfair dismissal.
Dean Parnell, a Partner in the Dispute Resolution Team of Sydney Mitchell, explains:
The Court of Appeal was concerned to high-light that the purpose of an Administration is the survival of the company as a going concern and not the liquidation of the assets and accordingly the exemption in Regulation 8(7) would not apply to Administrations.
The effect of the decision is that there is greater protection to employees where there is a sale of a business through an Administration but greater risk for potential purchasers. It remains to be seen how this will effect the "rescue culture" at a time when it is needed most.
For further information on this article or to gain further advice and expertise from Sydney Mitchell on Dispute Resolution or Employment issues please contact Dean Parnell (d.parnell@sydneymitchell.co.uk) or fill in our online enquiry form.
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