Employment Law Cases

Born London Ltd v Spire Production Services Ltd

A transferor did not breach TUPE when it incorrectly told the transferee that its annual bonus scheme was non-contractual whereas it was in fact a contractual entitlement of the transferring staff.

Regulation 11 of TUPE obliges a transferor to provide what’s called ‘employee liability information’ (ELI) to a transferee. This includes setting out ‘those particulars of employment that an employer is obliged to give an employee’ under s. 1 of the Employment Rights Act 1996 – the written statement of terms and conditions.

Born Ltd took over a contract from Spire Ltd via a service provision change under TUPE. Spire, in its ELI statement, listed the transferring staff’s entitlements under two headings: contractual and non-contractual. Under ‘non-contractual’ Spire erroneously (because it was in fact contractual) included a Christmas bonus of one week’s pay plus £7.50 per year of service paid each November.

Born brought a tribunal claim that Spire that given them incorrect information and it estimated its losses at around £100,000 over the life of the five-year contract. The claim was rejected as having no reasonable prospect of success on the grounds that reg. 11 of TUPE does not require the transferor to say whether all rights are contractual or non-contractual. Born appealed to the EAT.

The EAT agreed with the tribunal: there had been no breach of reg. 11. While some information required by a s. 1 statement will be contractual, this isn’t the case for all of it. Some forms of remuneration are non-contractual and there was no reason to think these were intended to be omitted from a s. 1 statement. Such a conclusion was also consistent with the Acquired Rights Directive (on which TUPE is based) which requires a transferor to notify the transferee of ‘all the rights and obligations that will be transferred’ – this also isn’t confined to contractual rights. #

Link to judgment: http://www.bailii.org/uk/cases/UKEAT/2017/0255_16_2803.html

Comment

This is a useful reminder that a section 1 statement is not of course a contract of employment – a much overlooked fact.

Whilst an obvious answer might be for transferees to ask as many questions as possible of the transferors as to whether obligations are contractual or not, the transferor is under no obligation to answer outside of the obligations to provide the specific information set out in TUPE and there is no contractual relationship between the transferor and transferee. Any errors may significantly affect the financial viability of the tender.

The best way to deal with it is right at the beginning in the outsource contract, telling suppliers that they will supply enhanced employee liability information and break it down into contractual and non-contractual obligations, provide it to those tendering and give indemnities for any losses suffered as a result of inaccurate information.