New employment ruling could affect administrators

Employment Law & HR news update

Following an Appeals Court ruling, administrators of collapsed firms could be affected by new legislation relating to unfair dismissal.

Administrators that sack employees of collapsed companies in order to minimise costs and then go on to sell the business, could be held liable for unfair dismissal.

The Appeals Court ruling, which it is hoped will lead to 'fewer administrations,' brings into play complex transfer rules.

The new ruling is centered around the dismissal of the chief executive of manufacturing company Ultralon Holdings, Bruno Baillavoine, on the day the firm filed for administration in 2008, which was deemed to be unfair.

This decision was reached as the dismissal was seen as being linked to the transfer of the firm to its new owner, which would mean that all employees are automatically protected under law. This transfer rule was taken into account despite the fact that the company had yet to find a new owner.

Ultralon was then sold as a going concern to Spaceright Europe the following month.

Partner at law firm Taylor Wessing, Sean Nesbitt, told The Telegraph, “The Court of Appeal has held Mr Baillavoine's dismissal was 'in connection with the transfer of a business' even though, at the time of his dismissal, the administrators stated it was to save costs and no buyer had been identified.

“This decision is contrary to business interests, and could even lead to fewer administrations, since it will make it harder for administrators to sell businesses – as going concerns may well result in job losses,” he added.

Mr Baillavoine is now set to sue for unfair dismissal.

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