Pre-pack Administrations and TUPE

[Thanks to Dr John McMullen of Wrigleys Solicitors LLP for preparing this case summary]

The EAT (Cox J) has handed down its decision in Pressure Coolers v Molloy, which is authority for the proposition that, on a proper construction of Reg 8 (1)-(6) of TUPE, it was the transferee, not the Secretary of State, who was liable to pay an employee's basic award and notice pay following his unfair dismissal by the transferee after a "pre-pack" TUPE transfer.

The claimant was a bench fitter employed by Maestro International Limited. Maestro went into "pre-pack" administration for the purposes of allowing Pressure Coolers to acquire its business. The claimant was dismissed shortly after the transfer.

First, the purpose of the administration was not to liquidate the transferor's assets, but to sell its business as a going concern. Reg 8(7) of TUPE (which would otherwise have excluded TUPE if the purpose were liquidation of assets) therefore did not apply. (See now OTG Ltd v Barke where it was held in absolute terms that the purpose of administration is not to liquidate the assets of the transferor).

The transferee however relied on TUPE, Reg 8 (1)-(6), which states that liability for sums payable to an employee under the relevant statutory claims (here, the basic award and notice pay) does not pass to a transferee, but is, instead, picked up by the Secretary of State.

The EAT (Mrs Justice Cox presiding) held that it could not. For Reg 8(1-(6) to apply the relevant liability must have arisen prior to the transfer. The employee had been dismissed by the transferee after the transfer and the transferee was solely liable for the sums claimed.