Shulmans Employment Team successful in important TUPE decision

Joanne Magill (top left) and Andrew Lightburn (bottom left), specialist employment solicitors at Shulmans, successfully defended a company in a recent Employment Appeal Tribunal, which clarified the law in relation to when the purchaser of an insolvent business is likely to become liable for employees of the insolvent business.

TUPE (The Transfer of Undertakings (Protection of Employment) Regulations 2006) will generally result in the transfer of employees to the employment of a purchaser when a business is bought as a going concern. However, there are some exceptions including where the business being sold is under the supervision of an Insolvency Practitioner and is either bankrupt or in the process of having its assets liquidated (Regulation 8(7) TUPE). In the case of Oakland -v- Wellswood, the question arose - can a purchaser of a business in 'administration' take advantage of the Regulation 8(7) exclusion so that TUPE does not apply? The Employment Appeal Tribunal confirmed it could.

The key consideration was not the label attached to the insolvency proceedings but what the Insolvency Practitioner intended.  In this case, the EAT decided that the Insolvency Practitioner was concerned with the liquidation of assets after it had become clear that the business could not be sold as a going concern.

This decision is an important decision in the current climate. Depending on the circumstances of individual transactions, it will remove some of the concerns which purchasers have of taking on insolvent businesses and the risk of acquiring liability for employees and any claims they may have. Pre-Pack business sales would appear to be the most obvious beneficiaries of this decision.

It is understood that the decision will be appealed to the Court of Appeal. 

For further information on this decision, please contact either Joanne Magill or Andrew Lightburn on 0113 245 2833.

News date 10th February 2009