The Employment Appeal Tribunal (EAT) recently ruled that the duty of an employer to keep and provide pay records under national minimum wage legislation transferred under the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations 2006 from the transferor to the new employer.
Under the National Minimum Wage Act 1998, employers have a duty to keep pay records, which employees have the right to request if they believe on reasonable grounds that they are being paid less than the amount to which they are entitled. This obligation to maintain and preserve records of employees' pay applies even after the employment relationship has ended. If the employer fails to allow the employees access, they have the right to complain to an employment tribunal.
The claimants in this case were Ms Bradburn and her colleagues, who in 2016 transferred under TUPE from Mears Homecare Ltd to a new employer.(1) In early 2017 the claimants served production notices on Mears requesting wage information for the previous 12 months, despite Mears no longer being their employer. Mears failed to respond within the 14-day period required under the National Minimum Wage Act.
The claimants made a claim to an employment tribunal, seeking a declaration and an award. The employment tribunal had to consider whether Mears was the correct respondent or whether the production notices should have been served on the new employer. Allowing the claim, the employment tribunal found that Mears continued to be bound by the duty to maintain records following the TUPE transfer. Accordingly, the employment tribunal ruled that Mears was the correct recipient of the notices and ordered it to pay each of the claimants £600.
The EAT upheld Mears' appeal, ruling that it was not the appropriate recipient of the production notices because the claimants' employment had transferred to the new employer for minimum wage purposes.
The EAT commented that, although it might appear more convenient for the transferor to continue to maintain the required pay records, inconvenience to the transferee was not a sufficient reason for the obligation to not transfer. The effect of TUPE is that there is no termination of employment and the transferee simply steps into the transferor's shoes. Subject to limited exceptions, all of the transferor's rights, duties and obligations pass to the transferee, including the obligation under the National Minimum Wage Act to keep and produce pay records.
This case clearly underlines that, on a TUPE transfer, the new employer must ensure that all records kept by the transferor in relation to the national minimum wage are transferred when it takes over the employees (especially as such records are likely to be held electronically). The transferor's refusal or failure to provide the records should be dealt with by way of indemnities or other contractual provisions in the transfer documentation.
From the transferor's perspective, it will remain liable for any wilful failure to comply with the minimum wage, as criminal liability does not transfer under TUPE. The transferor may want to keep a copy of any records transferred (in case of future prosecution) or ensure that the transferee is obliged to share pay records with the transferor, again in the event of prosecution.
(1) Mears Homecare Ltd v Bradburn EAT/0170/18 – judgment available here.
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