In Born London Limited v Spire Production Services Limited (2017) UKEAT/0255/16/LA HHJ Eady QC considered:
a)The information that has to be provided as employee liability information under Regulation 11 of TUPE
b)The scope of the information required by section 1 Employment Rights Act 1996.
Born took over a contract from Spire in circumstances that amounted to a service provision change. In providing the relevant employee information prior to the transfer Spire had stated that a non-contractual Christmas bonus was in place. Born contended that this was wrong and that Spire had given incorrect liability information for the purposes of TUPE.
Born complained to the ET that incorrect employee liability information had been provided. The claim was struck out as having no reasonable prospect of success. The EAT upheld that Judgment.
The basis for the EAT Judgment was that the obligation was to provide those particulars required by Section 1 ERA 1996. There was no obligation to state whether matters were contractual or not and there was no obligation under Section 1 to include particulars of any bonus.
I have long held the view that there is a lacuna in this aspect of TUPE. In the penultimate paragraph of the Judgment, it is said that:
“It may be the transferee would wish to have greater clarity as to the precise nature (contractual or otherwise) of some of the matters listed, but that must be for it to pursue as part of its due diligence; it is not a requirement laid down by regulation 11, which limits the transferor’s obligations for these purposes to the information listed under section 1 ERA” (para 38)
It is possible to see how the legislation as drafted can produce this result. From a policy perspective, it is entirely unsatisfactory.
Where one business is sold to another i.e. an ‘ordinary’ transfer, due diligence takes place, agreements are drafted and indemnities are put in place. Whereas in Service Provision Changes (SPC’S) the vast majority of scenarios do not give rise to that kind of agreement. If A contracts with B to provide a cleaning service and then awards the contract to C, the relationship between B and C is governed by the minimum standards set down in legislation. Furthermore, to varying degrees the relationship between A and B or B and C may not be amicable, legislation is needed to make things run smoothly.
There is no good policy reason why employee liability information is so restricted. Leaving aside whether there are any remedies available at common law (I am doubtful) given that such disputes are best resolved in Tribunals, the policy reasons err towards the need for contractual information to be provided. In particular:
a) The natural conclusion of the Judgment is that the new employer is only entitled to find out about the matters that go beyond that which is contained within a section 1 statement on day one of the new contract.
b) A new employer is effectively being bound to terms not only that they have not agreed (that is the nature of TUPE) but also in respect of which they were not aware.
c) The provision of contractual information creates legal certainty. The absence of contractual information creates legal uncertainty.
d) Given the difficulty with due diligence, it is surely advantageous that a party understands its potential liabilities in deciding whether the commercial bargain is sensible.
e) There is an incongruity in Regulation 4 of TUPE crystallising and protecting terms and conditions in full and yet the notification requirements requiring a more limited disclosure. However, this is not a drafting error and it must be the intention of the Regulations.
The underlying reason why section 1 ERA exists rather than a requirement to provide an employee with a written contract is designed to provide a degree of flexibility to employers in how they identify contractual terms and set out contractual arrangements. However, I fail to see why the correct legal position cannot be legislated for as follows:
1. The law provides a list of the absolute minimum information that should be supplied to an employee in writing.
2. However, in anticipation of a TUPE transfer, the employee liability information includes the relevant terms and conditions under that contract of employment. After all, the new employer will be bound by those terms on day one of the contract, why should they not know about them in advance?
There may be some debate as to the extent to which amending the legislation may infringe on issues of data protection, but given that this information is being provided to a likely future employer and sensitive information (basic pay) is already being provided, I do not agree that the concern is significant.
A further difficulty/lacuna already known but arguably consistent with the Judgment in this case is the form that the employee liability information takes. I have read commentary designed to be applied in the workplace that suggests that Regulation 11 is complied with by providing the new employer with a chart in which the figures are provided. e.g. under the heading ‘Holiday’, it would simply state ’28 days’. I suspect that many practitioners would describe this approach as standard.
Whether this is right or not seems to turn on whether or not the section 1 statement itself can be in the form of such a chart. Section 1 ERA 1996 states “The statement shall contain particulars of-“ and precedes the list that we all know well. Regulation 11(2)(b) explicitly refers to “those particulars of employment that an employer is obliged to give to an employee pursuant to section 1 of the 1996 Act”.
If this approach described above is correct then Regulation 11 doesn’t even require the future employer to be notified of the specific wording of any terms that are in place. This too is unsatisfactory for the reasons that I describe above.
The above article is for academic purposes only and does not constitute advice. If you would like advice in relation to the application of TUPE, please email me via firstname.lastname@example.org