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CJEU: 'Pre-Pack' Administration Does Not Disapply TUPE Protection

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Does a 'pre-pack' administration of a company mean that TUPE protection does not apply when an undertaking is transferred?

No, held the CJEU in FNV v Smallsteps.

A Dutch trade union sought a declaration that employees had transferred after a group of childcare centres were acquired under Dutch insolvency law via a 'pre-pack' administration. The CJEU considered the extent to which Article 5 of the Acquired Rights Directive 2001 precludes TUPE protection (under corresponding Dutch law) in the context of an employer going into administration or liquidation (as with regulation 8 of TUPE 2006).

The central issue was how the Directive applies to transfer employees in situations where a business is being salvaged (for example, administration), where TUPE would apply, or liquidated for the benefit of creditors, where it would not apply.

Administration (including 'pre-packs') is not ultimately aimed at liquidating the undertaking, so the employees would not lose the right to transfer when all or part of that undertaking is transferred, as was the case here.

However, a transfer would not occur in the event of "bankruptcy proceedings or any analogous insolvency proceedings. Furthermore, 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" i.e. analogous to liquidation in UK law.

Furthermore, even if a 'pre-pack' procedure might also be aimed at maximising satisfaction of creditors' claims, that would not make it a procedure instituted with a view to the liquidation of the assets of the transferor and so avoid the application of the Directive (i.e. TUPE); the exemption from TUPE is interpreted strictly.

Thanks to Ed McFarlane of Deminos HR for preparing this case summary.