Are you liable for incorrect information under a Regulation 11 letter pursuant to TUPE?

4 May 2017

If you are a transferor namely a business entity that is selling your business or transferring a contract to another service provider, you will know that under Regulation 11 of TUPE, you are required to provide Employee Liability Information.

In the case of Born London Limited (“Born”) v Spire Production Services Limited (“Spire”), it transpired that Spire had incorrectly stated that the Christmas bonuses were non-contractual. The question for the Court was, was that a breach of Regulation 11 giving rise to a compensation claim?

The EAT said no. The original Tribunal found that all Regulation 11 required the company to do was to provide particulars of employment as defined by Section 1 of the Employment Rights Act 1996. It did not go further to say whether or not you need to state remuneration was contractual or not.

If you are a purchaser of a business or a new service provider, you need to undertake full and proper due diligence. You need to assess whether or not an employee’s remuneration is contractual or not. Upon completing the due diligence exercise, this will then impact on the warranties or indemnities you may have in the Sale Purchase Agreement.

If there were well drafted warranties and indemnities, then a claim may have arisen accordingly.

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