Major case clarifies circumstances in which a company in administration may dimiss staff
An employment dispute at Crystal Palace Football Club has provided an important Court of Appeal clarification on TUPE.
Crystal Palace FC Limited and Another v Kavanagh and Others [2013] EWCA Civ 1410, concerned the dismissal of the four appellants and 25 others in 2010 when the club was in administration and suffering financial woes. The administrator thought he would be more likely to sell the club as a going concern with a skeleton staff in place. The club was sold to CPFC Ltd and went on to achieve success, starting the 2013-2014 season in the Premier League.
Legal argument centred on whether the TUPE Regulations (Transfer of Undertaking Regulations 2006) were transferred to CPFC or whether the employees were dismissed for economic, technical or organisational reasons (ETO). The Court of Appeal held the latter applied since the administrator did not have enough funds to pay the employees.
David Hinchliffe, head of sports at Walker Morris, which advised CPFC, says: “This is a major case and will clarify the circumstances in which a company in administration may dismiss staff without incurring a liability for unfair dismissal.
“The case should have a positive impact on the rescue culture.”
Irwin Mitchell associate Ami Naru says: “The employees’ dismissals were designed to ensure that costs were reduced to enable the club to continue to trade—and not therefore simply to make it a more attractive proposition for a purchaser.
"This should be welcome news for administrators, as well as for potential purchasers of distressed businesses.”
