K&L Gates: On Notice - February 2012: TUPE


How far does the insolvency exemption go?

The Court of Appeal recently gave its long awaited judgment in Key2law LLP v Gaynor De'Antiquis, in relation to the scope of the exemption to TUPE for companies which are subject to insolvency proceedings. The key issue was whether administration proceedings constituted 'insolvency proceedings' within the meaning of regulation 8(7) of TUPE.

The claimant was a solicitor who was dismissed on the ground of redundancy on 21 July 2008. The firm that had employed her went into administration on 25 July 2008. Three days later, the administrators entered into a management contract with Key2 in relation to the office where she had worked. She brought a claim against Key2 on the basis that Key2 was liable as the transferee of the undertaking where she had worked.

Regulation 8(7) of TUPE provides that where the insolvency proceedings are analogous to bankruptcy proceedings and have been brought with a view to the liquidation of assets, there is no transfer of staff and no claim for unfair dismissal against the transferee arises.

The Court of Appeal held that the appointment of administrators was not "with a view to liquidation" because the administrator was bound to pursue certain objectives such as rescuing the company. This principle applied even if the administrator had no realistic hope when appointed of rescuing the business.

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