does anyone, including judges, know the correct approach to ETO dismissals and administrations?

In March 2011 I commented on the uneasy interplay between insolvency law and employment law. At that time the question was whether highly contentious “pre-pack” administrations provided an opportunity to dispense with a workforce as well as most of the company’s debts by using a TUPE exemption. Oakland v Wellswood (2008) appeared to allow administrators to do so, whereas OTG Ltd v Barke appeared to close that option.
Against this background Crystal Palace FC Ltd & Another v Kavanagh & Ors is a recent and significant Court of Appeal case dealing with the fairness of dismissals by administrators of struggling companies. In 2009 the finances of the company running the club were in a parlous state and it went into administration at the beginning of 2010. The administrator wanted to sell the business as a going concern, if he could. One obstacle to this was that the ground where the club played was separately owned, and the only credible buyer, a consortium, wanted the ground as part of the deal. The next month the ground’s owner was also put into administration by its bankers. Negotiations ensued which were complex, fast moving, and subjected to spin by the parties, but were not immediately productive.
The administrator decided to mothball the club once the season ended (with relegation narrowly avoided), in the hope of selling later. As part of that, in May 2010 he dismissed 25 employees who, he was advised, could be sacked without ceasing the core activities of the company. The administrator finally sold the company to a consortium in August.
An Employment Tribunal found that while the sale was not the reason for the dismissals, they were for a reason connected with the transfer. Normally such dismissals are automatically unfair. However it went on to decide that the dismissals were fair, being for an “economic, technical or organisational” (ETO) reason, in that reducing the wage bill would allow the administrator to keep the business going – a reason separate from the longer term objective of being able to sell the business later. (However, reducing the workforce to make the business more attractive to a buyer would not have been an ETO reason).
The Employment Appeal Tribunal disagreed with the Employment Tribunal about whether the dismissals were for an ETO reason. Because the administrator intended to sell the club eventually, the dismissals could not be regarded as for an economic reason, but could only be treated as being to facilitate the sale, applying the dictum of Mr Lord Justice Mummery in Spaceright Europe Limited v Baillavoine [2012] ICR 520 that:
For an ETO reason to be available there must be an intention to change the workforce and to continue to conduct the business, as distinct from the purpose of selling it. It is not available in the case of dismissing an employee to enable the administrators to make the business of the company a more attractive proposition to prospective transferees of a going concern.
The Court of Appeal in turn took the contrary view, because the circumstances in the present case differed from those in Spaceright – for example footballing is a seasonal trade, and the players tend to be its only realisable asset – and the EAT had put too much emphasis on the term “mothballing”.

administrations, TUPE and redundancies

It is an unfortunate fact of modern life that it seems that new administrations for high street retailers and other businesses seem to be announced almost every working day. A key concern in the context of employment law and, more importantly, for the employees concerned, is whether their employment automatically transfers to the new employer under TUPE or whether the new employer can "cherry pick" or perhaps even select none of the existing employees for the new business.
There has been conflicting case law in the last few years but it seems that we now have a clear statement from the Court of Appeal.