28 June 2017
The Court of Justice of the European Union has recently ruled that TUPE can potentially apply to transfer staff who are employed in a business that is subject to a “pre-pack administration”.
In FNV v Smallsteps a Dutch trade union sought a declaration that TUPE applied to transfer employees who had been employed by a group of childcare centres which were subject to a “pre-pack administration” under Dutch insolvency.
The main issue that the European Court had to consider was the extent to which TUPE applied in this particular situation. The European Directive disapplies TUPE in certain limited insolvency situations. Did TUPE apply in this case? Ultimately the question is whether the business is being liquidated for the benefit of its creditors (in which case TUPE is disapplied) or where the business is being salvaged (in which case TUPE would apply to the affected staff).
In insolvency law, administration (which includes a 'pre-pack administration') is not aimed at liquidating the undertaking but at salvaging the business in some form. That was the position in the FNV v Smallsteps case which led the court to conclude that TUPE was not disapplied. This meant the affected employees had the right to transfer.
The Court noted that TUPE would not apply where there are "bankruptcy proceedings or any analogous insolvency proceedings”. Those proceedings must have been instituted “with a view to the liquidation of the assets of the transferor and be under the supervision of a competent public authority". If there was a liquidation TUPE would not apply in relation to any transfer. Even if a 'pre-pack administration' has as its purpose satisfying creditors' claims, that by itself does not make it a procedure instituted with a view to the liquidation of the assets.
TUPE is a complex area of law and requires careful consideration. The case is a reminder that while there are some limited cases where TUPE is disapplied, those circumstances will be interpreted very restrictively. Speak to your BTO corporate or employment law expert for more information.
The European case is reported here: http://www.bailii.org/eu/cases/EUECJ/2017/C12616.html
To discuss further please contact one of our BTO employment lawyers on 0141 221 8012.