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Provision of information in TUPE cases


In cases of employee transfer, there are rules and regulations that govern the process. Do you know exactly what you need to do in order to achieve compliance? Our article looks at a case when things went wrong.


How much information should the parties in a TUPE transfer provide and what might be the result if they do not?


The case of Eville and Jones (UK) Ltd v Grants Veterinary Services Ltd (in liquidation) ET/1803898/12, shed some light on this issue and the consequences that an erring party might face.


Regulation 11 of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) says that transferors (i.e. those disposing of a business, the original employer) have to provide transferees (those acquiring businesses, the new employer) with certain information about the employees involved in the transfer. This is known as employee liability information, which includes information about any claim the transferor believes the employees might bring against the transferee that relates to their time with the original employer.


For transfers that took place before 1st May 2014, employee liability information had to be provided no less than fourteen days before the transfer and that limit increased to twenty eight days for all transfers after that date. If, due to mitigating circumstances, the information provision deadline cannot be met, it has to be provided as soon as reasonably practicable.


If there has been a breach of Regulation 11 and no mitigating circumstances are offered, the transferee can bring a claim in the Employment Tribunal for compensation. The amount payable by the transferor should not be less than £500 per employee involved in the non-compliance. A reduction can be made at the discretion of the tribunal if it considers that it is “just and equitable”.


The Facts


The claimant, Eville and Jones (UK) Ltd (Eville), and the respondent, Grants Veterinary Services Ltd (Grants), had contracts with the Food Standards Agency (FSA) to supply veterinary and meat inspectors to slaughterhouses. These contracts were fixed term for three years and were due to expire in November 2011.


August 2011


Having been informed by the FSA that the existing contract would terminate on 1st April 2012, invitations were issued for new tenders at the end of August 2011. The deadline for tenders was 10th October and contractors had to provide evidence of their financial status to the FSA. Eville and Grants were two of six companies allowed through to the final stage of the tender process.


November 2011


When the outcome of the tendering process was announced, Eville found out that it had been successful. Grants, however, were not so lucky; they had won none of the available contracts and since the FSA was their sole customer, it meant they no longer had any business.


December 2011


This was just the latest piece of bad news for Grants, as they already had an unpaid debt due to HMRC of £333,994.75 including a late payment penalty. With the loss of the FCA contract, there was no chance of this being paid. HMRC presented a winding up petition to the Court on 9th February 2012 and the hearing date was set for 26th March 2012, eight days before the beginning of the new contracts.


February 2012


Eville & Jones entered into a new contract with the FSA in February 2012. Grants’ employees would transfer under TUPE to Eville on 2 April 2012.


Eville made a request for information relating to those employees that would transfer. Grants began to provide it to Eville, including schedules of contract terms and information about each transferring employee. Even as the information was being passed to Eville, it was clear to Grants that they were in severe financial difficulty and planning insolvency arrangements that made it very unlikely its employees would be paid. It was also highly likely that Grants knew that claims might be brought against Eville for unlawful deductions from wages as a result of the non-payment of salaries. That information should have been disclosed as part of the employee liability information process but this had not taken place.


March 2012


On the 27th, Grants sent out a letter to all its employees, warning them that the March salaries would be delayed until early April. Eville became aware (by indirect means) of the delay in salary payments to Grants’ staff. They were concerned about the matter but, being unaware of Grants’ financial position up to the transfer date, still believed that the payments would be made.


The main reason given for the delay by Grants was that damage to returned company vehicles had necessitated an assessment of deductions from wages.


April 2012


On the 2nd, Eville’s contract with the FSA began and Grants’ employees transferred. Grants’ bank account was frozen on the same day and its promise to make the March salary payments in early April could not be kept.


Eville issued tribunal proceedings against Grants for breach of Regulation 11(2)(d)(ii) of TUPE, arguing that given Grants’ knowledge of likely events, there were reasonable grounds to believe that it knew its employees might bring claims and had not disclosed this in accordance with the regulations.


The Employment Tribunal


The case was brought under the provisions of Regulation 11 of TUPE as amended by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014.


The Employment Tribunal reviewed the circumstances of the case;


  • that Grants had failed to provide employee liability information in breach of Regulation 11 of TUPE;

  • that they were in financial difficulty, meaning it was unlikely that employees would be paid;

  • that they were liable for unlawful deductions from wages and

  • that it was highly likely that Grants had reasonable grounds to believe that claims may be brought by employees against Eville.


Grants’ breach of Regulation 11 was clear-cut and, having established that, the Employment Tribunal turned to the remedy.


Eville had incurred management expenses and legal costs, together with additional banking expenses in having to deal with the problem of the inherited wage claims. The sum awarded by the Tribunal was £65,500, (based on £500 for each one of the 131 transferring employees) and was higher than the administrative costs that Eville had submitted with their claim. That initial estimate was not taken into account by the Tribunal, since to do so would have meant that the award per employee would be less than the minimum amount and they did not consider that the ‘just and equitable’ qualification applied. The breach, it said, was not minor or inadvertent, but significant.


Implications


This area of TUPE does not appear in many cases, so this is a good indication of the amount of compensation that may be awarded in future.


The decision of the Employment Tribunal reminds employers that they need to comply with their duty to provide employee liability information to a transferee. As a safeguard, potential transferees should look into arranging indemnity in respect of any transferring debts.


However, the legal position of such indemnities vis-a-vis liability under TUPE has not been tested and cannot be guaranteed.


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