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TUPE and insolvent employers

Posted on 11th July 2013
Checklist

TUPE protects employees affected by a transfer of a business or undertaking (or part of it) in a number of ways. The protections are not as stringent if the transfer involves a business which is subject to insolvency proceedings. This checklist will help you determine what protections you are entitled to if you are employed by an employer that is transferred and is subject to insolvency proceedings.

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Julie Temple Julie
Temple
Partner Telephone: 01473 694407

Protections under TUPE are not as stringent if the transfer involves a business which is subject to insolvency proceedings

Terminal insolvency proceedings

If the insolvency proceedings are aimed at liquidating the assets of your employer, the protections under TUPE are very limited. Such proceedings are likely to include bankruptcy of an individual and compulsory or creditors’ voluntary liquidation of a limited company.

If your employer is subject to any of these proceedings:

  • Your employment will not automatically transfer from your employer to the buyer; and
  • Any dismissal will not be automatically unfair even if the reason for it was the transfer.
Removal of these protections under TUPE will not prevent a buyer from deciding to employ you but it does mean the buyer could make changes to your contract of employment for whatever reason (subject to your agreement). 

Non-terminal insolvency proceedings

If your employer is subject to insolvency proceedings that are not intended to liquidate the assets you will have greater protection.

You:

  • will automatically transfer with the terms and conditions of your employment from your employer to the buyer.
  • will be entitled to protection against certain dismissals which may be automatically unfair.
  • may be entitled to recover some or all of some debts owed to you by your employer from the Secretary of State and the National Insurance Fund (NIF).
  • may be forced to accept changes to your terms and conditions of employment imposed by the buyer.

National Insurance Fund

Depending on your circumstances, you will be able to recover from the NIF certain payments not paid to you by your employer:

  • Up to eight weeks’ outstanding pay (subject to a weekly pay cap which is currently £450).
  • Up to six weeks’ unpaid holiday pay (subject to the weekly pay cap).
  • Payment of the statutory minimum notice period (subject to the weekly pay cap).
  • Payment of a basic award (if ordered by an employment tribunal) or statutory redundancy payment.
  • Payment of up to 12 months’ unpaid employer and employee pension contributions.
  • Apprenticeship fees.
Payments from the NIF are subject to deductions for tax and national insurance where appropriate.

To make a claim you must complete Form RP1.

Permitted changes to terms and conditions of employment

Where an employer is subject to insolvency proceedings the employer, buyer or insolvency practitioner can make some changes to your terms and conditions of employment. The changes can be made without your consent providing certain procedures are followed.

The changes must be made to safeguard employment opportunities by ensuring the survival of the business or undertaking (or part of it).

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