65,500 reasons to provide employee liability information (and ensure its accurate)
Those of you who have attended our TUPE seminars will have heard us talk at length about the importance of employee liability information.
Those of you who have attended our TUPE seminars will have heard us talk at length about the importance of employee liability information (the information which a transferor is obliged to provide about the transferring employees) and the risks if it is not provided or the information is not accurate or up to date. A Tribunal can award the transferee (the incoming employer) such compensation as is just and equitable having regard to any loss sustained but not less than £500 per employee to whom the failure relates. However, we will also have told you that we are not aware of any such claims having been made. That has now changed.
The case of Eville & Jones (UK) Limited v Grants Veterinary Services Limited (in Liquidation) is the first Tribunal decision we are aware of to address the issue of failures in relation to employee liability information. In that case the Tribunal awarded Eville & Jones (the successful transferee) £65,500 compensation.
Grants along with others supplied veterinary and meat inspectors to slaughterhouses pursuant to a 3 year fixed term contract with the Food Standards Agency (“FSA”). The FSA was its sole customer.
On retender Grants was unsuccessful and Eville & Jones was appointed as successor contractor for the Grants and other work. The parties accepted from the outset that there would be a service provision change when Eville & Jones took over the work on 2 April 2012 and that TUPE would apply. A process began whereby Eville & Jones sought and Grants provided employee liability information about those employees who were to transfer.
Unbeknown to Eville & Jones, Grants had been experiencing financial difficulties. On 27 March 2012 it advised all of its employees that they would not be paid as normal on 30 March but would instead be paid on 5 April (after the transfer date). The reason for the delay (which the Tribunal expressed scepticism about) was said to be a need to assess the deductions to be made from final salaries in respect of damage to company vehicles. Eville & Jones became aware of this late on 30 March but believed the salaries would be paid on 5 April. Ultimately the bank froze Grants’ accounts on 2 April, the employees went unpaid and the liability for the unpaid wages passed to Eville & Jones under TUPE.
Eville & Jones brought a claim against Grants alleging it had failed to notify it of the change to the employee liability information provided namely that by the transfer date (and most probably earlier than this) Grants had reasonable grounds to believe that the employees may bring a claim for the unpaid wages. The Tribunal agreed and awarded Eville & Jones £500 per employee who transferred (a total of £65,500). This was significantly more than the losses incurred by Eville & Jones as a result of the failure and it is worthy of note that the failure was the failure to notify and not the liability for the unpaid wages themselves.
What does this mean for me?
Whilst this is only a Tribunal decision and may not therefore be followed in other cases, it is a stark reminder that employers should ensure in transfer situations that not only is employee liability information provided (at least 28 days prior to the transfer date) but that the information provided is kept under review, to exercise caution and provide as much information as possible and notify the transferee of any changes as soon as possible. Earlier this year the time period when employee liability information must be provided was increased from 14 to 28 days pre transfer. Therefore there is an increased risk that the information provided will be out of date by the time of the transfer.
For transferees the decision gives comfort that Tribunals are prepared to make awards of compensation against transferors who fail to provide information, provide inaccurate information or do not update the information provided. However, as with any claim evidence is critical and retention of the information provided will be key, along with evidence of the failure and the losses incurred as a result.