Administration and TUPE rules

The employee in this case was made redundant a few days before the company she had worked for went into administration. The administrators subsequently entered into a management contract with another entity under which part of the business was transferred to that entity. The employee brought a claim for unfair dismissal against the new entity arguing that the company’s liability had been transferred under TUPE.

In most cases, under TUPE rules, where a business is transferred to another the employees will automatically transfer with the business and any dismissal connected with the transfer will be unfair unless it is for an economic, technical or organisation reason entailing changes in the workforce. However, TUPE rules relieve transferees of their obligations where the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of an insolvency practitioner.

The question the Court of Appeal had to decide in this case was whether an administration is outside TUPE rules, like insolvency and analogous proceedings. The Court of Appeal held that it is not, because an administrator is appointed primarily to rescue the company even though that may not subsequently be possible. Accordingly, the Court said that a TUPE transfer of liabilities will take place where a company is placed into administration and the business is subsequently transferred to another entity.