Employees’ protection under the EU Pre-pack Directive after the Trilogue: Employees’ protection under TUPE is alive and employees will still transfer in case of related party pre-packs!

In 2022 the European Commission presented a Proposal for the harmonization of rules on pre-packs. The protection offered under the TUPE Directive, as interpreted and developed by the CJEU, provides that employees transfer where the pre-pack is not aimed at the liquidation of the enterprise. As a consequence, employees will transfer most notably where a former shareholder or another related party acquires the business out of insolvency. In its unexplained attempts to give pre-packs a maximal boost, the Commission's Proposal simply provided that all pre-packs would be deemed to be aimed at liquidation, which would mean that employees would never transfer on the basis of European Union law.

The Council's position has been somewhat unclear. The European Parliament , however, pushed back against the Commission's Pre-pack Proposal with an amendment aimed at safeguarding employees’ protection. With these three different positions, the Pre-pack Proposal entered the Trilogue phase, a process also referred to as the "back room of the back room." Since the Trilogue is not a transparent procedure, outsiders could not know in which direction the negotiations were heading. Like Schrödinger's cat, we did not know whether employees' protection was dead or alive while the Trilogue was ongoing.

The outcome of the Trilogue remains somewhat messy. However, we conclude that, based on the full text of the Pre-pack Directive, it is sufficiently clear that employees' protection under TUPE is alive and that employees will continue to transfer in cases of related-party pre-packs. The rather aggressive attempt by the Commission to abolish employee protection in such cases has been unsuccessful.