TUPE: Keeping Minimum Wage Records
In the event of a relevant transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), the duty to keep and produce wage records for the employees that transfer lies with the transferee.
The Employment Appeal Tribunal held in the case of Mears Homecare Limited v Bradburn and others that the obligation to maintain records, pursuant to section 9 of the National Minimum Wage Act 1998 (NMWA), is no longer the responsibility of the transferor as the employment merely continues with the transferee without ceasing.
Bradburn and the other claimants served 10 production notices under section 10 NMWA, requesting wage information from Mears in February 2017 for the previous 12 months. During this period, the claimants had been employed by Mears for 9 months before moving to the transferee for the final 3 months as a consequence of the relevant transfer. Mears failed to respond to the notices within 14 days and the claimants argued that this constituted a breach of their obligation to keep pay records under section 9 NMWA. This obligation remains even when the employment ceases.
At first instance, the Employment Tribunal held that Mears were still obliged to retain the claimants' wage records as the employment was deemed to have ceased. Mears were ordered to pay the claimants 80 times the hourly rate for minimum wage (£600).
However, the Employment Appeal Tribunal overturned the decision. Focusing on the continuity of the employment contract, they ruled that employment continued without ceasing, with the transferee stepping into the shoes of the transferor following the relevant transfer under TUPE. Therefore, Mears were not obliged to maintain wage records for the employees and the duty to keep pay records under the NMWA had transferred to the transferee along with all the rights, powers, duties and liabilities in connection with the contract of employment.
Receiving and then maintaining the wage records transferred under TUPE was not viewed as a great burden for the transferee by the Appeal Tribunal and they saw no reason why it should not form part of the transfer agreement. In addition, as the employment contract governing the employment relationship continues as if it had been made with the transferee from the outset, any records of the employment and the obligation of maintaining them should automatically transfer with the contract.
This decision and its enforcement has been supported by HMRC in a recent policy statement. It notes that no particular difficulty is envisaged in pursuing the transferee for the recovery of penalties. As the transferee can be liable for equal pay claims for several years prior to the transfer, having access to wage records preceding the transfer will save time and expense in the event of a claim and ensures that information relating to the employment contract is maintained in the same place and by the party it relates to following the relevant transfer.
For more information, please contact Claire Knowles in the employment team.