Does the Acquired Rights Directive (ARD) apply to a pre-pack?
Author: David Seals
In Federatie Nederlanse Vakvereniging and others v Smallsteps BV (Case C-126/16), the European Court of Justice considered how the ARD applied to a pre-pack. The insolvent business consisted of 380 childcare centres employing 3,600 staff in Holland. An administrator was appointed and the Court made a declaration of insolvency. The same day 250 of the centres were sold to Smallsteps with 2500 staff retained. Four of the employees not kept on challenged this. The ECJ held that the ARD protects employees in such a situation. The pre-pack was not a transfer where the transferor was the subject of bankruptcy proceedings or any analogous insolvency proceedings with a view to the liquidation of the assets of the transferor under the supervision of a competent public authority. Accordingly, the claimants were protected by the ARD.
The ECJ’s decision accords with the decision of the Court of Appeal in the Key2Law case which held that administrations can never be “insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor" for the purposes of TUPE, with the resulting loss of unfair dismissal protection for employees.