Born London Ltd v Spire Production Services Ltd UKEAT/0255/16
Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) a transferor or outgoing contractor is required to provide a transferee or incoming contractor with employee liability information (ELI). This includes the particulars of employment that an employer is obliged to give to an employee under s1 Employment Rights Act 1996 (ERA). If the transferor does not provide the ELI the transferee can bring a claim in the employment tribunal within three months of the date of the transfer.
In this case, a transferor incorrectly stated in its ELI to a transferee that a Christmas bonus was non-contractual, when it turned out it was contractual and the tribunal had to decide whether this was a breach for which the transferee could claim compensation.
Born London Ltd (Transferee) took over a contract from Spire Production Services Ltd (Transferor) to print Sotheby’s catalogues in circumstances that amounted to a service provision change under TUPE. Prior to the transfer, the Transferor had stated in its ELI that each employee was entitled to a non-contractual Christmas bonus but following the transfer, it became apparent to the Transferee that the Christmas bonus was likely to be contractual.
The Transferee brought proceedings in the employment tribunal arguing that ELI should comprise contractual remuneration entitlements whereas the Transferor argued that this interpretation was wrong, and that the Transferee was attempting to mitigate something which it should have resolved through due diligence. The employment tribunal held that there was no requirement to state in the ELI whether or not remuneration was contractual and struck out the Transferee’s claim.
The Transferee appealed and the Employment Appeal Tribunal (EAT) dismissed the appeal. It agreed with the employment tribunal that s1 ERA sets out employers’ requirements in respect of a statement of employment particulars but there was no obligation to state whether the particulars were contractual or not.
What to take away
As the EAT made clear, a transferor or contractor should provide ELI on both contractual and non-contractual requirements. It noted that it would be up to the transferee to undertake more due diligence on whether employee remuneration is contractual or not.