The idea behind this is to ensure a due diligence exercise is carried out on business transfers. A failure to provide employee liability information can entitle a transferee to a minimum amount of compensation of £500 per employee in respect of whom the information was not provided, unless it would be “just and equitable” to award a lower figure.
There have been very few cases on this area. However, in Eville & Jones (UK) Ltd v Grants Veterinary Services Ltd (In Liquidation) ET/1803898/12, a transferor was ordered to pay £65,000 in compensation to a transferee representing £500, per employee who transferred.
Following a re-organisation of contracts, Grant’s employees TUPE transferred to Eville. The tribunal found that by the date employee liability information should be provided, it was clear that Grants was in financial difficulty and planning insolvency arrangements that would make it unlikely that its employees would be paid and after it failed to pay salaries, Grants would be liable for unlawful deductions from wages. At this point it was highly likely that Grants had reasonable grounds to believe that claims might be brought against Eville. This should have been disclosed as part of the employee liability information process.
Given Grants' knowledge of likely events, there were no special circumstances to explain its failure to comply with the duty to provide employee liability information which meant that it had not been reasonably practicable for it to have done so.
The tribunal awarded a total which exceeded the loss it actually considered had been caused to Eville. The Tribunal noted that it was not constrained by the total losses in making an order for compensation.
Tribunals rarely recognize insolvency as being special circumstances so as to absolve business from their obligations under employment legislation. Therefore in such circumstances practitioners should try to ensure as much information as is available to them is provided to any transferee. Where possible, matters should be dealt with by way of warranties and indemnities, although it is not certain that an indemnity if tested would be sufficient to actually defeat liability under TUPE.
This is intended for general information only and should not be considered as giving advice in relation to any individual case nor be taken as applying to any particular case. No liability is accepted for any such use of the information contained here.