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Keeping minimum wage and pay records

Which party is responsible after a TUPE transfer?

Employers must prepare and keep records of each employee’s pay and hours to demonstrate compliance with national minimum wage legislation. This involves storing all payslips for several years, even if employment has terminated in the meantime. If appropriate records cannot be produced on request, a tribunal may award up to 80 times the relevant hourly national minimum wage rate per employee.

Under the TUPE Regulations, which apply on the purchase of a business or in an outsourcing or insourcing scenario, employees’ contracts of employment and all rights and liabilities relating to them automatically transfer from the outgoing employer to the incoming employer.

In a recent case, the Employment Appeal Tribunal (EAT) has considered how these areas of law interact; does the obligation to keep pay records transfer under TUPE or does the outgoing employer retain some responsibility?

The case concerned Ms Bradburn and her colleagues, who were employed by Mears Homecare Limited until their roles transferred to new employers under TUPE in October 2016. In February 2017, the employees served ‘production notices’ on Mears requesting pay information for the past 12 months, which covered both pre-transfer and post-transfer periods of employment. Mears did not provide the information sought and argued that it was not required to maintain any records as this duty had transferred under TUPE. The employees brought tribunal claims seeking an award for non-compliance with national minimum wage legislation.

The EAT agreed with Mears and confirmed that, save for any criminal liability for wilful non-compliance, all pay recording responsibility transferred to the incoming employer under TUPE. There had been no termination of employment and Mears was under no ongoing obligation to maintain pay records. The fact that it might be more convenient for the outgoing employer to keep its existing records was not relevant; it was for the parties to ensure that appropriate commitments relating to the provision of existing records were included in a transfer agreement.

For parties to a business transfer or service provision change, the decision underscores how important it is that well-drafted legal documents are in place apportioning liability for contractual and statutory claims arising pre- and post-transfer. TUPE is a complex area which can attract heavy penalties where mis-managed, so we recommend taking advice whenever it does or could apply.