No Compensation under TUPE where Bonus Wrongly Described as Non-contractual

An outgoing service provider was not in breach of its obligation to provide employee liability information when it wrongly stated that an annual bonus paid to transferring employees was not contractual.

Speedread

An outgoing service provider was not in breach of its obligation to provide employee liability information when it wrongly stated that an annual bonus paid to transferring employees was not contractual. TUPE requires the outgoing employer to provide details of the particulars of employment required under section 1 Employment Rights Act 1996 (ERA). Section 1 ERA is not limited to contractual terms and does not require an employer to state whether the terms are contractual or not. The employee liability information was therefore correct.

Facts

In Born London Ltd v Spire Production Services Ltd, Born took over a contract from Spire in circumstances that amounted to a service provision change, resulting in Spire’s employees transferring to Born under TUPE. Spire stated that a non-contractual Christmas bonus was in place. Born contended that this was wrong and in fact the bonus was contractual in nature. Spire had therefore given incorrect employee liability information. Born brought a claim for failure to comply with the employee liability provisions of TUPE, seeking over £100,000 in compensation.

The employment tribunal rejected the claim and Born appealed to the Employment Appeal Tribunal (EAT).

Decision

The EAT dismissed the appeal.

TUPE required Spire to provide Born with the particulars of employment required under section 1 Employment Rights Act 1996 (ERA). Section 1 ERA is not limited to contractual terms and does not require an employer to state whether the terms are contractual or not. When Spire informed Born that the bonus was non-contractual, this was additional information which it was not required to provide under TUPE. It had therefore complied with its obligation to provide employee liability information.

Implications

The employee liability information provisions were introduced to ensure that employers inheriting employees under TUPE are provided with basic information about the employees who will transfer to them, including their particulars of employment. This is particularly important on a second generation outsourcing where there is no contract between the incoming and outgoing contractors which can deal with such matters and require the outgoing contractor to warrant the accuracy of the information provided.

This case demonstrates the limited nature of the transferor’s obligations under TUPE. The obligation is simply to provide details of the particulars of employment. It is not necessary to state whether any particular term is contractual or non-contractual and if an employer does provide this information and it is incorrect, there is nothing that the new employer can do about it, at least in terms of a claim under TUPE. Wherever possible, incoming contractors should seek to obtain as much information as possible about the employees’ terms, including documentary evidence. However, in reality this will not always be possible, particularly where the outgoing provider is disgruntled at having lost the contract and may therefore be unwilling to cooperate.