A tribunal has ordered a vet service to pay penalty compensation of £500 for each of its 131 employees on losing its contract with the Food Standards Agency.
In the case of Eville & Jones v. Grants Veterinary Services, the employment tribunal has held that TUPE meant that an outgoing contractor providing veterinary services to the Food Standards Agency (Grants) were under a duty to notify the incoming contractor (Eville) about unlawful deductions of wages claims its staff would have.
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) state that outgoing contractors must, not less than 28 days (this was 14 days at the date of this case) before the date of the proposed transfer of the business, notify the incoming contractor of certain information including any claims that an employee has brought or may bring against their employer.
Here the ET found that 14 days before the date of the transfer, it was clear that Grants was in financial difficulty and planning insolvency arrangements that would make it unlikely that its employees would be paid. The ET further found that there were no special circumstances to explain Grants’ failure to comply with their obligation which might relieve Grants from liability.
When finding that the transferor has failed to comply with its duty to provide information in this way, an Employment Tribunal must award compensation to the transferee amounting to a minimum of £500 per employee unless it is just and equitable to award less. The ET found it was not just and equable to reduce the award below £500 because Grants’ failure was not minor or inadvertent but significant and anything but inadvertent.
The award exceeded Eville’s actual losses and therefore amounted to a penalty payable by Grants.
- Employers that are incoming contractors should where possible seek an indemnity from the end customer covering the outgoing contractor’s defaults under TUPE, particularly where the outgoing contractor is in financial difficulty. The same applies to buyers of businesses, which should seek an appropriate indemnity from the seller.
- Employers that are outgoing contractors or sellers should apply their mind to potential claims by employees and ensure that all employee liability information is disclosed to the incoming contractor or buyer not less than 28 days before the date of the proposed transfer.