Transferee liable for unfair dismissal award following purchase of a business from an Administrator
Lawrence King
22 Dec 11, 9:03 am
The case of Pressure Coolers Limited v Molloy & Others [2011] UKEAT 0272_10_0906 provides a reminder on handling employees to those who purchase businesses via a “pre-pack” scenario from an Administrator.
In this case Mr Molloy had worked for Maestro International Limited (“Maestro”) for a number of years prior to Maestro entering Administration.
The Administrator enacted a pre-pack sale to Pressure Coolers Limited (“PCL”). It had been agreed that the Administrator would issue letters of redundancy to the employees PCL deemed no longer required, no such letters were sent prior to the completion.
In turn PCL advised Mr Molloy he was being made redundant after their purchase of Maestro.
The Employment Tribunal considered that there had been a transfer of Mr Molloy’s employment to PCL and he was entitled to a claim for unfair dismissal.
The question was, who was bound to discharge this liability: the Secretary of State (on behalf of Maestro) or PCL?
Given the dismissal occurred after the transfer, it is PCL not the Secretary of State who is liable to discharge Mr Molloy’s claim.
Some have commented that this goes against the grain of the rescue culture and amendments to the TUPE Regs in 2006. However, quite simply on a practical basis, it would seem it is now incumbent upon the purchaser to ensure that that the timings of any potential dismissals are enacted in an appropriate manner in order to avoid an unexpected claim such as PCL received from Mr Molloy.”
Comment by Charles Wiggin05/01/1204:48PM
Lawrence Presumably the administrator is being sued for failing to issue the redundancy notice prior to the sale if this was really agreed?
Comment by Lawrence King10/01/1202:35PM
Charles, I have not heard so as yet. I am uncertain as to the terms and mechanism of the proposal/agreement to dismiss prior to transfer. This would clearly impact upon the potential for the action you suggest
Comment by Mandeep Virdee27/01/1211:35AM
Very relevant topic Lawrence, well done.
To add further, the Court of Appeal case of Key2law (Surrey) LLP v Gaynor De’Antiquis [2011] EWCA Civ 1567 clarified the following:
- that administration proceedings do not constitute “insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor” in terms of regulation 8(7) of the TUPE Regs – Therefore meaning the fall outside the insolvency exclusion.
- The COA considered that it could not be said that appointing an administrator was done “with a view to the liquidation of the assets of the transferor”, and that this will be the case even in those circumstances where it is obvious from the outset that there is no hope of rescuing the company, i.e. a pre pack situation.
- The judgment clarifies that a TUPE transfer will take place in administration situations.
Administrators must tread carefully when presented with this situation.