Out-Law News 2 min. read

Full TUPE protections should not apply to Carillion employees, says UK minister


Carillion employees should not benefit from the full protections provided for under the Transfer of Undertakings (Protection of Employment) Regulations (TUPE), a UK minister has said.

Andrew Griffiths, parliamentary under-secretary at the Department for Business, Energy and Industrial Strategy, said that the Carillion liquidation should be considered an orthodox one for TUPE purposes, with the effect being that most of the protections employees enjoy from TUPE will not apply to Carillion's situation. 

Carillion entered compulsory liquidation earlier this year and there has been a political debate since over the extent to which the UK's TUPE rules apply to its workers.

Normally, TUPE protects employees if the business in which they are employed changes hands by moving them and any liabilities associated with them from the old employer to the new employer by operation of law. However, TUPE also provides that the position is different when the employer goes into insolvency. If the insolvency event is liquidation then most of the TUPE protections fall away (TUPE-lite). If it is an administration, most remain in place.

The distinction is therefore important in the case of Carillion employees impacted by the company's insolvency in terms of the protections that might be afforded to them.

Some commentators have been speculating as to whether the Carillion liquidation is more like an administration as the official receiver has been operating the Carillion contracts and companies before transferring or selling them off, much as would happen in an administration.

The topic was addressed in the House of Commons on Wednesday during a debate organised by Eleanor Smith, MP for Wolverhampton South West – the constituency where Carillion has its headquarters.

During the debate, Labour MP Laura Pidcock claimed that EU case law could allow TUPE rules to be applied to Carillion employees as if the Carillion insolvency was an administration. However, Griffiths said that there were reasons why the government does not support the application of TUPE rules to Carillion's situation.

"The reason why TUPE is not applied in various insolvency situations, including liquidation, is that it is considered an obstacle to rescuing the businesses and saving jobs," Griffiths said. "That has to be our priority, of course. We want to rescue and secure these jobs."

"A decision taken by policy makers and governments of all colours not to apply TUPE provisions in these cases is well understood, as are the reasons behind it. As a result, regulation 8 of the TUPE regulations 2006, covers insolvency proceedings and provides that these provisions do not apply 'where the transferor is the subject of bankruptcy proceedings or…insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of an insolvency practitioner'. That is exactly the case that we see here with Carillion," he said.

Griffiths said that "an emergency Act of parliament, creating a special statutory scheme for those named companies, having retrospective effects" would be required to apply the TUPE regime to the Carillion employees. He said such a move "would cut across fundamental principles at the heart of our democracy".

"The compulsory application of TUPE to Carillion companies is not, therefore, a matter that can simply be agreed between the liquidator and the unions," Griffiths said. "There is legal precedence here that we cannot simply ignore."

Employment law expert Edward Goodwyn of Pinsent Masons, the law firm behind Out-Law.com, said courts could be asked to determine the extent of TUPE protections in this liquidation scenario.

"Whilst it is interesting to see that the government’s 'party line' is still being followed, it was noteworthy to see that this legal argument was raised in parliament," Goodwyn said. "Whether this will encourage would-be claimants to run the argument in future litigation will have to be seen. However, there remains a real risk that such a claim will be brought, and this may mean that those who have taken over Carillion contracts/businesses have a greater contingent employment risk than if TUPE-lite applied in its usual way."

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