The Employment Appeal Tribunal has ruled in five conjoined appeals that TUPE applies in all administrations, since they constitute ”relevant insolvency proceedings” and not ”liquidation proceedings”. This will be the case even in “pre-pack” administrations, where a business is placed into administration but immediately sold to a purchaser who has been lined up to buy the business beforehand.
The way TUPE usually operates is varied when a business subject to insolvency proceedings is sold. Different rules apply depending on whether a business is subject to ”liquidation proceedings” at the date of the sale (such as compulsory liquidation or creditors’ voluntary liquidation) or ”relevant insolvency proceedings” - ie, insolvency proceedings which have not been opened with a view to the liquidation of the assets of the company under the supervision of an insolvency practitioner.
In the case of relevant insolvency proceedings this decision means that TUPE will apply as normal and the employees will automatically transfer to the purchaser under their existing terms and conditions and are protected from being unfairly dismissed for a reason relating to the transfer. However, purchasers are granted limited scope to agree variations to the terms and conditions of transferring employees (provided these are necessary to safeguard the future of the business) and certain pre-existing debts owed to the employees up to set (and arguably low) limits will not transfer to it.