What is the extent of the obligaiton of a transferee to honour an employee benefit provided by a transferor when it does not itself offer that benefit? The answer is that it has to provide a benefit which substantially equivalent to that provided by the transferor.
This case concerned a profit sharing scheme. Ms French and others were employed by Sainsburys and contractually entitled to benefit from its bonus scheme offering either cash payment or the grant of shares. Sainsbury’s transferred its interest to Pitney Bowes Management Services Ltd which then transferred it to MITIE Management Services. A practical difficulty arose in that neither Pitney Bowes nor MITIE could issue Sainsbury’s shares.
The matter came before the ET on the employees’ application under section 11 of the Employment Rights Act 1996 to determine what particulars ought to have been included in or referred to in a statement of particulars so as to comply with the Act.
The ET decided that the profit sharing scheme had transferred to the transferee as a result of the operation of Reg 5(2)(a) of TUPE 1981 (now Reg 4(2)(a) of TUPE 2006).
The EAT reversed the tribunal’s decision. A broad approach was required.Kay J held (para 16) “the entitlement of the transferred employees in such a case is to participation in a scheme of substantial equivalence but one which is free from unjust, absurd or impossible features.”
The effect of this is that transferee employers owe a duty to provide a scheme equivalent to that enjoyed by the employees when contracted by the transferor even if it did not operate such a scheme or any scheme before the transfer.