The Employment Appeal Tribunal (EAT) held in OTG Ltd v Barke (2011 UKEAT) that TUPE will apply to transfer employees when a company goes into administration, including on a pre-pack administration. This decision overturns the leading case of Oakland v Wellswood (Yorkshire) Ltd, which found that TUPE did not apply to "pre-packs".
The general rule under TUPE is that where insolvency proceedings are "with a view to the liquidation of the assets" of a company (commonly known as terminal proceedings), TUPE will not apply to transfer the employees. However, where the insolvency proceedings are not with a view to liquidation of the assets (i.e. non terminal proceedings), the employees will transfer to the transferee, although certain of the company's debts will be taken on by the Government.
It was originally assumed when TUPE 2006 came into force that in an administration situation the employees would transfer since it is common for parts of a business to be sold off and continue to operate as a going concern. However, this view was cast into doubt by the EAT in Oakland where it was held that the employees did not transfer under TUPE in a pre-pack administration.
The originally held view has now been restored and the safest approach for companies is to assume that employees who are employed immediately before the transfer will transfer under TUPE when a company goes into administration, including on a pre-pack administration.