Did you know the duty on employers to maintain National Minimum Wage records moves to the transferee when a TUPE transfer takes place?
The Employment Appeal Tribunal confirmed in Mears Homecare Ltd v Bradburn and others (May 2019) that the duty on employers to maintain National Minimum Wage records moves to the transferee (or ‘new’ company) when a TUPE transfer takes place.
National Minimum Wage records: the law
Under Section 9 National Minimum Wage Act 1998 employers have an ongoing duty to keep sufficient records to establish that their workers have received the national minimum wage dating back three years. Where they believe that they have been underpaid, workers can require their employer to produce pay records. If the employer fails to do so within 14 days, a Tribunal can make a declaration and award up to 80 times the relevant NMW rate. The ‘employer’ for NMW purposes is “the person by whom the employee or worker is (or, where the employment has ceased, was) employed”.
What does this mean for me?
This decision is important for both parties to a TUPE transfer.
From a transferor perspective, it is important to note that the transferor will always remain liable under criminal law for any wilful failure to comply with the National Minimum Wage Act 1998. This means that transferors should protect their position by retaining a copy of NMW records and/or make a specific provision in the transfer agreement that the transferee will make any relevant pay records available to the transferor on request.
In order to comply with the obligation to provide pay records to workers, the transferee will need to ensure that it receives full records from the transferor. Again, the transferee may wish to specify, as part of the contractual arrangements for the transfer, that all minimum wage records maintained by the transferor are delivered over to the transferee. Transferees can further mitigate risk by requesting an indemnity from the transferor against any future claims.
Things might be a bit more complicated further down the line, for example in a second or third generation transfer (where workers transfer from a contractor to a subsequent contractor). In these circumstances there will be no direct contractual relationship between the transferor and the transferee. However, it might still be possible to obtain some protection from the client, amongst other options. If you find yourself in this situation, or have any other TUPE-related questions, please contact a member of our Employment Law team.