X-mas bonuses were wrongly described as non-contractual
No breach of the Reg. 11 obligation
Regulation 12 of the TUPE Regulations 2006 gives rise to a rare situation where Employer A can sue Employer B in the employment tribunal.
Employee Liability Information (“ELI”) – the law
Where a TUPE transfer takes place (be that a business transfer or a service provision change – change of contractor), the outgoing employer is obliged to provide the incoming employer with certain pieces of information about the transferring employees. This information must be supplied at least 28 days prior to the transfer and is known as employee liability information. The required information includes “those particulars of employment that an employer is obliged to give to an employee pursuant to section 1 of the 1996 Act.” These duties are imposed by TUPE Regulation 11.
Consequences of non-compliance relating to ELI
TUPE Regulation 12 allows the incoming employer in a TUPE situation to raise a claim against the outgoing employer for any failure by the outgoing employer to comply with Regulation 11. The remedy for such an action can include compensation of up to £500 per employee in respect of whom the failure applies.
The recent case
Reported cases of this nature are rare. However the recent decision in Born London Limited v Spire Production Services Limited is one such case and one which throws up an “interesting” result/warning for those businesses inheriting employees under TUPE. Very briefly, the outgoing employer (Spire) told the incoming employer (Born) that Christmas bonuses were non-contractual. After the transfer the employees alleged that the bonuses were contractual. Born raised proceedings alleging that this inaccurate disclosure by Spire was in breach of Regulation 11. They were unsuccessful on the basis that while Regulation 11 does require disclosure of the statement of particulars of employment, within that statement of particulars can be contractual and non-contractual matters. Accordingly, it did not follow that referring to something as non-contractual which was in fact contractual amounted to a breach. Essentially, the branding of something as “non-contractual” is additional information beyond the scope of what is required by Regulation 11.
What can we take from this case?
Firstly, the case did not produce a satisfactory result in the sense that the outgoing employer provided, on the face of it, untrue information to the incoming employer but the incoming employer was not protected by Regulation 11. Secondly, and perhaps more importantly, the case emphasises the importance of carrying out thorough due diligence when inheriting employees under TUPE. If there is contractual documentation in place regarding the transfer, the incoming employer should insist on appropriate warranties/indemnities to protect against such anomalies.
If you are acquiring employees from another business, take advice.
Associate – Employment Law