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Employee liability information is not limited to contractual matters

25 September 2017

The Employment Appeal Tribunal (“EAT”) has ruled that the employee liability information (“ELI”) that a transferor is required to provide under regulation 11 of TUPE is not limited to contractual entitlements. In addition, the EAT decided that there is no obligation on the transferor to set out whether any entitlement is contractual or not.

Regulation 11 provides that ELI a transferor must provide includes "those particulars of employment that an employer is obliged to give to an employee pursuant to section 1 of the [Employment Rights Act 1996]" (“ERA”).

The ERA states that this information must include "the scale or rate of remuneration or the method of calculating remuneration", but does specify whether the required particulars are confined to contractual entitlements or not. TUPE provides no clarity on this point.

Background

Born London Ltd (“Born”) took over a printing contract for Sotheby’s from Spire Productions Services Ltd (“Spire”) via a service provision change under TUPE. Pursuant to its obligations under regulation 11, Spire provided ELI to Born listing employees’ entitlements under two headings: “contractual” and “non-contractual”.

Under the heading “non-contractual”, Spire stated that a Christmas bonus of one week’s pay, plus £7.50 per year of service, was in place. Following the transfer, it became apparent to Born that the Christmas bonus was likely to be a contractual entitlement.

Born issued proceedings under to regulation 12 of TUPE, alleging that Spire had provided incorrect ELI and seeking of compensation of £100,000 (to span the lifetime of the contract). The Employment Tribunal assumed that the bonus was contractual for the purpose of the proceedings (and separate proceedings concluded that it was indeed contractual).

Dismissing the claim, the Tribunal concluded that Born had no reasonable prospects of showing that Spire had failed to comply with the requirement to provide ELI. This was on the basis that the information required by section 1 of the ERA was not confined only to contractual information.

The EAT’s judgment

On Born’s appeal, the EAT agreed that section 1 of the ERA was not confined to contractual matters. It accepted that some of the particulars required were likely to be contractual, but not all of them. For example, remuneration will often be contractual but some elements of it might not be. There was no reason to think that any non-contractual remuneration was intended to be omitted from a section 1 statement. In addition, the EAT ruled that there was no obligation for a transferor to state whether the entitlements were contractual or not.

The EAT considered that this conclusion was also consistent with the EU Acquired Rights Directive (on which TUPE is based), which requires a transferor to notify the transferee of “all the rights and obligations that will be transferred”. Again, this does not confine the information to be provided to contractual terms only. Accordingly, the EAT dismissed Born’s appeal.

Implications

This decision, the first to consider the scope of ELI information, confirms that it covers both contractual and non-contractual terms and that an error in labelling is not sufficient for a successful claim under regulation 12 of TUPE. A broad approach should therefore be adopted when providing details of remuneration as part of ELI.

It is generally helpful to transferees that ELI must contain both contractual and non-contractual terms as this will help ensure they are receiving comprehensive information about employees’ terms and conditions in the broadest sense. This case does, however, prompt the note of caution that transferees should undertake their own due diligence about the payments being made and particularly whether or not any payment is contractual.

This is not always a straightforward task. For example, payments can become contractual via custom and practice, which will be a question of fact – a point that the EAT acknowledged. It will be for the transferee to reach its own view about whether a payment is contractual or not, irrespective of any label used by the transferor.

Transferors should nonetheless be careful to provide accurate information. This decision could arguably be confined to its facts of incorrect labelling based on a genuinely mistaken belief. It does not necessarily follow that an Employment Tribunal would reach the same conclusion where a transferor carelessly provided inaccurate salary figures or holiday entitlements. The point at which an error amounts to a failure properly to provide ELI is an issue still to be fully tested. 

Born London Ltd v Spire Production Services Ltd [2017] IRLR 493 – judgment available here

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