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TUPE and Administrations – Again!

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The Employment Appeals Tribunal, in the case of Spaceright Europe Ltd v Baillavoine and another UKEAT/0339/10, was asked to consider whether the dismissal of an employee by a company in administration was automatically unfair under TUPE when, at the time the employee was dismissed, no buyer had been identified by the Administrators.

In this case the Claimant, Bruno Baillavoine, was the former Chief Executive Officer of Ultraton Holdings Limited (“the Company”). He was dismissed on the same day that the Company was put into administration, 23 May 2008.

On 25 June 2008 the business and assets of the Company and its subsidiary (which was also in administration) were sold as a going concern to Spaceright Europe Limited (“Spaceright”). The case was initially before the Employment Tribunal which decided that Mr Baillavoine’s dismissal was unfair as the sole or principal reason for his dismissal was a reason connected with the transfer which was not an economic, technical or organisational reason entailing changes in the work force.

In the Tribunal proceedings Mr Baillavoine had alleged that the Administrators were working with the Financial and Operations Directors of the Company to achieve their own objectives. The Financial and Operations Directors of the Company were directors of Spaceright. He also alleged that the transfer of the business to Spaceright had been agreed in principle at the time of his dismissal.

The Tribunal found that Mr Baillavoine was dismissed to enable a purchaser of the business to acquire the business and assets without the continued employment of its CEO. It held that the reason for his dismissal was a reason connected with the subsequent transfer but it was not an economic, technical or organisational reason entailing changes in the workforce. Spaceright appealed to the Employment Appeals Tribunal.

The EAT when making its decision considered two conflicting decisions – Ibex Trading v Walton [1994] ICR 907 and Harrison Bowden [1994] ICR 186. In Ibex it was decided for a dismissal to be connected to the transfer a specific transfer had to be in contemplation at the time of the dismissal. In Harrison the court found that it wasn’t of any importance as to whether the transferee had been identified at the time of the dismissal.

The EAT held that the approach in Harrison was correct and it didn’t matter that the transferee, Spaceright, was not identified at the time Mr Baillavoine was dismissed by the Administrators, it held that the dismissal was automatically unfair. It held that the Administrator’s reason was not an ETO one entailing changes in the workforce. It held that the business was always going to need a CEO to continue as a going concern (and indeed Mr Baillavoine was replaced by an employee of Spaceright) and therefore the reason related to the sale of the business.

The effect of the EAT’s findings was that liability for Mr Baillavoine’s dismissal passed to Spaceright under regulation 4 of TUPE 2006.
 

For further information please contact a member of our Insolvency and Business Recovery team.

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