TUPE and insolvent administrations

TUPE applies whenever an administrator is appointed over an insolvent business. This is because the primary aim of an administrator is always to sell the business as a going concern (Key2Law (Surrey) LLP v De’Antiquis [2011] EWCA Civ 1567).

However, to encourage the rescue of failing businesses, TUPE protection is modified in the following two ways, as long as the administrator has been appointed before the transfer date:

• by ensuring that some of the transferor’s pre-existing employment debts do not pass to the new employer. These include statutory redundancy pay, arrears of pay, pay in lieu of notice and the basic award for unfair dismissal (all capped as set out on page 369). These sums are paid instead by the Redundancy Payments Office; and

• by providing greater freedom to change contract terms (see below).

The Secretary of State only takes on debts that are already due at the transfer date, for example, unpaid wages outstanding at the transfer date, or redundancy dismissals carried out before the transfer date. The Secretary of State does not take on liability for debts incurred after the transfer date. For example, where a transferee buys an insolvent business from the insolvency practitioner and carries out redundancies after the transfer date, liability for those redundancy payments will rest with the new business owner, not the Secretary of State (Pressure Cooker v Molloy [2012] ICR 51, Secretary of State v Dobrucki [2015] UKEAT/0505/13/JOJ).