In a decision that departs from an earlier Employment Appeal Tribunal (EAT) ruling, the EAT has ruled in OTG Ltd v Barke and others that normal TUPE principles always apply to administrations, including pre-pack administrations, because an administration does not constitute “bankruptcy proceedings or any analogous insolvency proceedings…instituted with a view to liquidation of the assets of the transferor”. This means that employees do automatically transfer to the buyer in an administration situation and thus are protected against unfair dismissal. Consequently, purchasers cannot restrict their purchase to an insolvent company’s business and assets but must also take on all its relevant employment-related liabilities.
The decision does not follow the EAT’s earlier ruling in Oakland v Wellswood (Yorkshire) Ltd. Without a clarifying appeal, the existence of two conflicting EAT decisions on the same point has the potential to cause uncertainty. However, the EAT panel in OTG included the EAT President and so it would seem likely that this decision will be followed in future.
Compulsory and creditors’ voluntary liquidations are now the only insolvency proceedings in which the automatic transfer of employees may not occur, meaning that certain employees will not have special protection against dismissal.
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