TUPE Takeaways: How Insolvency Proceedings Can Modify TUPE

As part of our TUPE takeaways series, we consider a recent Employment Appeal Tribunal decision which explored how TUPE applies when a transferor is insolvent. How can TUPE be modified? And what conditions need to be met?

Employment protection in an insolvency context

The sale of a struggling business will often trigger TUPE. The usual tests will apply, looking at whether there is a transfer of an "economic entity" i.e. a grouping of resources which has the objective of pursuing an economic activity.

If TUPE applies, employees will usually automatically transfer to the buyer. The buyer "steps into the shoes" of the seller, and the contracts of employment, as well as any liabilities or claims, will transfer to the buyer. However, TUPE is modified in an insolvency scenario – and the way it is modified depends on whether the business is in administration or liquidation. Administration aims to achieve survival of the business in some form; whereas liquidation is