Under the National Minimum Wage Act 1998 (NMWA) employers have a duty to keep pay records and employees have the right to request the records if they believe on reasonable grounds they are being paid less than the national minimum wage.
If the employer fails to allow the employees access, they have the right present their complaint to the Tribunal. In the recent case of Mears Homecare Limited v Bradburn and others the duty to keep pay records was also found to have transferred to the transferee.
Mears Homecare Limited v Bradburn and others
- The Claimants were employed by the Respondent (who is the Appellant in this appeal) and were TUPE transferred to the transferee on 31 October 2016.
- On 1 February 2017 the Claimants served production notices on the Respondent (their former employer) requesting wage information for the previous 12 months. This period would cover 9 months in which the Claimants were employed by the Respondent but 3 months when they were employed by the transferee.
- The Respondent failed to respond within the 14 day time limit under the NMWA and the Claimants made a claim at tribunal for a declaration and award due to the failure.
- The claim was allowed and the Respondent was ordered to pay each of the Claimants the sum of £600 pounds which was 80 times the current hourly rate for national minimum wage.
- This award is mandatory if the complaint is well founded.
- The Respondent appealed. The EAT overturned the decision and found that the duty to keep pay records transferred to the transferee upon transfer pursuant to TUPE.
- This meant that the Respondent was no longer required to keep pay records or respond to the production notice. The correct party to serve the production notice on was the transferee.
- The EAT commented that although it may appear more convenient for the transferor to continue to maintain the pay records, inconvenience to the transferee is not enough of a reason for the obligation to not transfer. An employee’s employment does not come to an end due to a transfer, but continues, with the whole of their employment transferring to the transferee.
- There is no reason the transferee cannot insist that all records kept by the transferor in relation to the NMWA are transferred to them upon their taking over of the employees, especially as these records are likely to be held electronically, as is the case with other documents. Refusal by the transferor to provide the records should be able to be dealt with by way of indemnities or other contractual provisions in the transfer.
- Transferees must take steps to secure the pay records upon transfer. This may cause difficulties for parties who will now have to consider the transfer of the existing pay records when entering into asset purchase agreements.
- HMRC changed their policy from 2 July 2018 so that the new employer is charged when an employee has previously been underpaid before the transfer takes place, bringing it in line with the premise that the transferee is responsible, not the transferor.
- The fact that not all TUPE transfers involve a written agreement was not considered by the EAT. Those involved in drafting agreements in the service sector either on behalf of customers or service providers should also consider amending their standard clauses.