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TUPE Again

Many IP’s are sick of hearing about The Transfer of Undertakings (Protection of Employment) Regulations 2006 (a.k.a. “TUPE”). IP’s are probably also sick of hearing “it’s a bit of a grey area” from lawyers. A recently published decision of the English Court of Appeal in the case Key2Law (Surrey) LLP v De' Antiquis means TUPE is a necessary talking point again. The good news is that TUPE has become slightly less of a “grey area”.

The Case

Ms De’Antiquis (“Ms D”) had been employed by a law firm which had gone into administration. A few days before the administrators were appointed Ms D was dismissed by reason of redundancy. A few days after the appointment of administrators the firm in administration entered into a management contract with Key2Law (Surrey) LLP (“K2L”) in relation to two of the firm’s offices. Ms D raised an employment tribunal claim against K2L thereafter claiming inter alia (i) she was a transferee under the TUPE regulations because she worked at one of the offices in question; and (ii) K2L was liable to her in relation to her dismissal under regulations 4 and 7 of the TUPE regulations. The Employment Tribunal and the Employment Appeals Tribunal found in Ms D’s favour.

The Decision

IP’s may recall that the TUPE regulations have the effect of transferring all employees to a purchaser at the point of sale (Regulation 4) and also making any dismissal relating to the transfer (before or after the sale) providing it is not for an “ETO” reason an unfair dismissal (Regulation 7). Regulation 8(7) states:- “Regulations 4 and 7 do not apply to any relevant transfer 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.”

Basically, if an insolvency procedure falls under Regulation 8(7) then TUPE does not apply. If it does not fall under Regulation 8(7) then TUPE does not apply. There has been ambiguity for some time over whether administration instituted under Schedule B1 of the Insolvency Act 1986 falls under Regulation 8(7) or not. Previous decisions of the Employment Appeals Tribunal have suggested it will depend on what it was hoped administration would achieve. More recently a decision of the Employment Appeals Tribunal suggested administration could not fall under Regulation 8(7). The English Court of Appeal has answered this question very decisively and has stated that administration does not, and will not at any time fall under Regulation 8(7). This means TUPE will apply to all transfers from a business in administration. The intentions of the parties when entering administration will in future be irrelevant in answering this question.

Takeaway Points

• Given the use of pre-pack sales out of administration, IP’s should be aware that TUPE now applies to any relevant transfer in terms of the TUPE regulations where the transferor is in administration.

• This decision will in all likelihood increase claims being raised in Employment Tribunals following business transfers out of administration.

• This decision will affect (i) the willingness of some parties to purchase a business out of administration; and (ii) the warranties that will be sought from purchasers when purchasing a business out of administration. Watch your contracts!

• TUPE does not generally apply to liquidation in the same way (however, advice should be taken; particularly in regard to Provisional Liquidation where there is little decided authority

BBM Solicitors specialise in advising IP's in both contentious and non-contentious matters (including transactional work). Contact: Eric Baijal () or Alasdair Baijal ().

This briefing note is current 11 January 2012 and is our understanding of the position described at that date. Legal advice ought to be taken before relying on its terms (particularly to ensure the law has not changed).

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