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Born London Limited v Spire Production Services Limited EAT – 28 March 2017

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If a transferor provides inaccurate Employee Liability Information (ELI) to a transferee does the transferee have a right to compensation under Reg 12?  Answer; not necessarily.

The Facts

Born took over a print finished contract from Spire.   It was a Reg 3(1)(b) service provision change.  The client was Sotheby’s. The print finishing contract contract had a term of 5 years.    Born were told by Spire, as part of the Reg 11 ELI provided by Spire before the transfer, that the 30 + employees who were to transfer had a ‘non-contractual’ Christmas bonus of one week’s pay plus £7.50 per year of service payable each November.  After the transfer the employees asserted that this entitlement was contractual and for the purposes of a strike out application this was assumed to correct. (Indeed in a separate and subsequent case between Born and some employees a different Employment Tribunal held this to be the case.)

The ET Judgment

Born brought a Reg 12 claim against Spire. Born’s case being, essentially, that because the bonus was non contractual it would have had a discretion not to pay it and would not have done so.  It had therefore suffered loss which exceeded £100,000 over the life of the contract.

Its case was that Spire failed to comply with Reg 11(2)(b) which required Spire to provide:  Those particulars of employment that an employer is obliged to give an employee pursuant to section 1 of the [ERA] (i.e. the Statement of Initial Particulars)Section 1(4) of the ERA provides that the statement that the employer was obliged to provide the employee with was to contain particulars of:  (a) the scale or rate of remuneration or the method of calculating remuneration,  (b) the intervals at which remuneration is paid (that is, weekly, monthly or other specified intervals). 

Spire applied to strike out Born’s case as having no reasonable prospect of success.  Spire’s case was, quite simply, that it had provided the section 1(4) details in relation to the Christmas bonus, (as it had) and that section 1(4) did not require it to state whether the bonus was contractual.   As it had no obligation to state whether the bonus was contractual it was not in breach of Reg 11 when it stated a bonus was non contractual in circumstances when it was in law contractual.

The Employment Judge acceded to Spire’s application.  Born appealed.

The EAT judgment

Born’s case was that it was implicit in section 1(4) that the employer was required to state whether remuneration was contractual and, if it was not, then it was required by Council Directive 91/533/EU (on an employer’s obligation to inform employees of the conditions applicable to the contract or employment relationship; (the 1991 Directive) and Acquired Rights Directive (the ARD).  Consequently, Spire was required to accurately inform Born on the transfer that the bonus was contractual.

The EAT (HHJ Eady QC) dismissed the appeal for the following reasons:

(i)  It was important to note that although section 1 of the ERA was incorporated into Reg 11 it had a much broader application.

(ii) Although section 1 is a right which pertains to employees the particulars provided are not a contract although the statement is persuasive (but not conclusive) evidence of a contract.

(iii)  Although pay is likely to be an important part of the contract not all forms of remuneration are contractual the learned judge was not persuaded that non-contractual matters should be left out of the section 1 statement.

(iv)  The reference in Article 2(1) of the 1991 Directive to the ‘contract or employment relationship’ envisages that there may be particulars provided which are not contractual.  Further, the requirement in Art 2(2) that the employer notify the employee of the ‘essential aspects of the employment relationship‘ does not impose a requirement to identify the contractual nature of the entitlement.

(v)  The requirement in Art 3(1) of the ARD for the transferor to notify the transferee of all the rights and obligations that will be transferred is not confined to contractual rights.

Link to Judgment

Comment

The remedy of a transferee is likely to lie either in any contractual indemnities (there were none in this case) or in an action for negligent misrepresentation.

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