Cautionary Note About New TUPE Decision On Sales By Administrators

A recent ruling by the Employment Appeal Tribunal appears to open the way for buyers of insolvent businesses to escape having to take on the former owner's obligations to the employees of the business.

Broadly, when a business is transferred the Transfer of Undertakings Protection of Employment Regulations 2006 (TUPE) operate to transfer the employment contracts to the new owner. The ruling in Oakland v. Wellswood (Yorkshire) Ltd (UKEAT/0395/08), however, means that a transfer by an administrator of an insolvent business will not necessarily bring TUPE to bear. According to the EAT, if the administrator's subjective analysis is that the purpose of the administration is the liquidation of the insolvent business's assets, it follows that a transfer of the undertaking is exempted from TUPE by virtue of TUPE Regulation 8(7).