Case update (2): TUPE – Employee liability information

Summary: Does TUPE Employee Liability Information need to include detail as to whether employees’ entitlements are contractual?

No, says the EAT in Born London Limited v Spire Production Services Ltd available here.

Facts:  Born took over a contract from Spire to print Sotheby’s catalogues. Prior to the transfer Spire provided Born with Employee Liability Information as required under TUPE (regulation 11). Spire provided details of the employees’ Christmas bonus, but stated that it was “non-contractual”. Following the transfer, it became apparent to Born that the Christmas bonus was likely to be a contractual entitlement.  Born contended that, because the bonus was contractual in nature, Spire had given incorrect Employee Liability Information and Born should be compensated for this misstatement and claimed £100,000 in compensation under TUPE to cover this contractual obligation going forward. Born argued that because the section 1 statement has to include the scale or rate of remuneration or “the method of calculating remuneration”, Spire had to specify whether a payment was contractual in nature.

The EAT upheld the Tribunal’s decision that, even if the bonus was contractual (an issue that was not entirely clear), Born’s claim had no reasonable prospect of success. The obligation under TUPE is to notify the transferee employer of the same details that an employer is obliged to give a new employee in a written statement under section 1 of the Employment Rights Act. A section 1 statement is not a contract of employment; some particulars will be contractual in nature, others will not. Although pay is likely to be an important part of the employment contract, there are forms of remuneration that are non-contractual and these are also meant to be included in a section 1 statement. However, whether or not a bonus is contractual is additional information and does not form part of the Employee Liability Information.

Employee Liability Information was designed to provide a transferee with a comprehensive list of rights and obligations, to allow it to undertake a commercial assessment of the potential liabilities it would incur after a transfer. The precise contractual nature of some of those rights and obligations is a matter for due diligence for an incoming service provider or purchaser.

Implications:  TUPE requires a broad approach when providing information on remuneration and information should be provided in respect of all aspects, including the basis of calculation. However, TUPE does not require going through the difficult process of deciding whether or not an aspect of remuneration is contractual.

This case makes clear that TUPE requires transferees to carry out their own due diligence not rely solely on the information given to them by the transferor.  This case is also a useful reminder to ensure that where possible, as a transferee, you have in place well drafted warranties and indemnities from the transferor in order to protect you from any unexpected liabilities.