Latest in Employment Law>Articles>TUPE Update: Transfer of Minimum Wage Records
TUPE Update: Transfer of Minimum Wage Records
Published on: 16/10/2019
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Dr John McMullen
Dr John McMullen

In this TUPE update Dr John McMullen looks at the concept of automatic transfer of employment rights and obligations from transferor to transferee, to the exclusion, going forward, of the transferor.  Recent case law confirms that an employer's duty under s.9 of the National Minimum Wage Act 1998 to maintain wage records transfers under TUPE.  It was suggested by the court that the transfer of this type of information should become part of the TUPE arrangement. 

In this issue we look at the concept of automatic transfer of employment rights and obligations from transferor to transferee, to the exclusion, going forward, of the transferor. This is neatly illustrated by the decision of the GB Employment Appeal Tribunal (Choudhury J (P) in Mears Homecare Ltd v Bradburn UKEAT/0170/18.  In this case the EAT decided that the employer's duty under s.9 of the National Minimum Wage Act 1998 to maintain wage records transfers under TUPE. A transferor is no longer required to maintain records for employees who transfer.

The Claimants were employed by Mears, before Mears, on 31 October 2016, transferred the business/activities in which they were employed to two transferees, who were not party to the case. On 1 February 2017, the Claimants’ served 10 production notices under s.10 of the NMWA requesting wage information from Mears, their old employer, for the preceding 12 months. That period covered nine months during which the Claimants were employed by Mears and three months during which they were employed by the relevant transferee. Mears appealed on the basis it was not the proper respondent. Because of the TUPE transfers, the obligation had passed to the relevant transferees.

Mears failed to respond to the production notices within the period of 14 days required (see s.10 (9) of the NMWA). The Claimants then brought complaints before an employment tribunal for a declaration and award for this failure. The employment tribunal upheld the claim against Mears, and it was ordered to pay each of the Claimants the sum of £600 pounds (which was 80 times the current hourly rate for national minimum wage.).

Choudhury J first addressed some technical points concerning the wording of the NMWA. From the provisions of s.54 (4) It could be deuced that the NMWA can apply in respect of the current employer or a past employer “where the employment has ceased.” The NMWA was silent on what happens when there has been a TUPE transfer.

Here the effect of the principle of automatic transfer of rights and liabilities under the Acquired Rights and TUPE came into play.

In Berg and Busschers v Besselsen [1990] ICR 396, the ECJ held that under Article 3.1 of the ARD:

“…the transfer of an undertaking entails the automatic transfer from the transferor to the transferee of the employer's obligations arising from the contract of employment or an employment relationship, subject however to the right of Member States to provide for joint liability of the transferor and transferee following the transfer. It follows that unless the Member States avail themselves of this possibility the transferor is released from his obligations as an employer solely by reason of the transfer and that this legal consequence is not conditional on the consent of the employee’s concerns.”

The UK government did not take up the option generally to create joint and several liability of transferor and transferee. in respect of any obligations arising before the date of the transfer. So a TUPE transfer has the effect of transferring all of the transferor’s rights, duties and obligations under or in connection with the contract of employment to the transferee, to the exclusion, going forward, of the transferor.

As above stated s, 54(4) of the NMWA defines an employer for the purposes of the NMWA as the person “by whom the employee or worker is (or where the employment has ceased was) employed”. Only if the employment had “ceased” could the NMWA catch the old employer. But on a TUPE transfer the transfer “shall not operate so as to terminate the contract of employment of any person employed by the transferor” (Reg 4(1)). So the contract of employment does not terminate (or “cease”) when a relevant transfer takes place. Instead, it continues as if it had originally been made between the transferring employee and the transferee. In conclusion, employment had not employment had not “ceased” for the purposes of s.54 (4) of the NMWA. Therefore, the only part of the definition which applied was that relating to the current employer as at the date that the production notices were served. That employer was, of course one or both of the transferees.

The obligation to maintain records under the NMWA transfers to the transferee. And this was because Regulation 4(2) of TUPE provides that the effect of a relevant transfer is that “all of the transferor’s rights, powers, duties and liabilities under or in connection with any such contract shall be transferred by virtue of this Regulation to the transferee” and “any act or omission before the transfer is completed shall be deemed to have been an act or omission of the transferee.”

Of course there might be some practical concerns with this conclusion. But in the opinion of Choudhury J:

“There is no reason why the transferee upon taking over should not be a position to insist that, as part of the arrangement under the transfer, all records maintained by the transferor for the purposes of NMWA are delivered to the transferee. Given that such records are likely to be held in electronic form, the difficulties hardly appear to be insurmountable. If that were to occur then the right to serve a production notice after the transfer would not be an “empty right” as the Tribunal found at paragraph 46 of the Reasons. It would be a substantive right exercisable against the transferee who would be able to use the records obtained from the transferor to comply with the request….It seems to me, however, that that is the sort of risk that could be catered for by the provision of indemnities in a standard transfer and/or other contractual arrangements where this is a service provision change, for example, in order to protect the transferee’s position”.

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Disclaimer The information in this article is provided as part of Legal Island's Employment Law Hub. We regret we are not able to respond to requests for specific legal or HR queries and recommend that professional advice is obtained before relying on information supplied anywhere within this article. This article is correct at 16/10/2019