We look at the recent employment tribunal decision in the case of Eville and Jones (UK) Ltd v Grants Veterinary Services Ltd (in liquidation) ET/1803898/12, which considered whether a transferor had failed to comply with its obligation to provide employee liability information to the transferee in a TUPE transfer.
Under Regulation 11 of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), a transferor is required to provide a transferee with certain information about the transferring employees, known as employee liability information. This includes information about any claim that the transferor has reasonable grounds to believe that employees might bring against the transferee arising out of their employment with the transferor.
In respect of transfers that took place before 1 May 2014, employee liability information had to be provided not less than 14 days before the transfer. That time limit was extended to not less than 28 days before the transfer in respect of transfers taking place on or after 1 May 2014. Where special circumstances made that not reasonably practicable, it had to be provided as soon as was reasonably practicable.
Where there has been a breach, the transferee can bring a claim in the employment tribunal and the compensation payable by the transferor is not less than £500 per employee in respect of whom the transferor has failed to comply with regulation 11, unless the tribunal considers it just and equitable in all the circumstances to award a lesser sum.
The claimant, Eville and Jones (UK) Ltd (Eville), and the respondent, Grants Veterinary Services Ltd (in liquidation) (Grants), supplied veterinary and meat inspectors to slaughter houses under contracts with the Food Standards Agency (FSA). The three year fixed term contracts were due to expire in November 2011. The FSA issued notices to all the contractors in March 2011 that their existing contracts would terminate on 1 April 2012. On 30 August 2011 the FSA issued invitations to tender. Tenders had to be submitted by 10 October 2011 and, in order to be allowed to tender, contractors had to provide evidence of their financial standing to the FSA. Eville and Grants were among six companies that were allowed through to the final tender stage.
On 24 November 2011 it was announced that Eville had been successful in tendering for all of the FSA's cluster areas of operation in England and Grants did not win any of the available contracts. The FSA was the sole customer of Grants' business, which effectively meant a cessation of its core business activity. Grants had already been experiencing financial difficulties and had engaged the services of Baker Tilley, accountants and insolvency practitioners, in July 2011. Cooper Williams, business recovery professionals, were engaged to assist Grants in November 2011.
It was recognised from the outset that TUPE would apply to the change in service provider and that all of Grants' employees would transfer to Eville on 2 April 2012. Eville sought employee information relating to those employees that would transfer. Grants provided information, including schedules of contract terms and information about each transferring employee. Eville entered into a new contract with the FSA on 8 February 2012 for the delivery of services across England.
Grants had given notice to appoint an administrator on 17 February 2012, although no appointment was ultimately made. Grants' employees received their wages at the end of February paid in arears as normal. Grants continued to experience financial difficulties and was working towards a possible company voluntary arrangement. On 27 March 2012, Grants' employees were sent letters advising them that their March salaries would not be paid on 30 March 2012 when they were due but would be delayed until 5 April 2012. The main reason given for the delay was that Grants wanted to assess the amount of any deductions to be made from wages on account of damage to returned company vehicles.
Cooper Williams informed Barclays Bank (Grants' bank) that a company voluntary arrangement proposal was being sent to them. Barclays Bank then cancelled Grants' on-line banking facilities.
Grants should have provided employee liability information to Eville by 19 March 2012 but the company was under an ongoing obligation to provide employee information up to the date of the transfer, 2 April 2012, if there was a change to the situation. Eville indirectly became aware late on 30 March 2012 of the late salary payment letters that had been sent to employees but was unaware of Grants' financial position up to the transfer date. Eville's contract with the FSA commenced on 2 April 2012 and Grants' employees transferred to it with effect from this date. Barclays bank froze Grants' bank account in the afternoon of 2 April 2012 and Grants failed to pay the employees' March salaries that it had undertaken to pay on 5 April 2012.
Eville issued employment tribunal proceedings against Grants for breach of regulation 11(d)(ii) of TUPE and alleged that Grants had failed to provide the employee liability information.
Employment tribunal decision
The tribunal concluded on the facts of this case that as at 19 March 2012, Grants had reasonable grounds to believe that claims would be brought in circumstances where the employees were in fact unlikely to receive their March salaries and that the business was in financial difficulties. The tribunal upheld Eville's claim and awarded £65,500 to Eville (based on £500 for each one of the 131 transferring employees).
Whilst this is only an employment tribunal decision and is not therefore binding, it does serve as a useful reminder to employers to ensure that they comply with their duty to provide employee liability information to a transferee. It is also sensible for a potential transferee to try to secure an indemnity in respect of any transferring debts.
There are few reported cases on this area of TUPE so this decision is a useful indication of the amount of compensation a tribunal is likely to order. However, in this particular case, it is unlikely that the transferee will recover its compensation so this may be a hollow victory.