The issue in this case is whether a transferor is required to answer a production notice served by a former employee under s. 10 of National Minimum Wage Act 1998 (NMWA). Central to this issue is whether the transferor is an ’employer’ within the meaning of s. 54(4) of the NMWA which provides: ” (4) In this Act “employer”, in relation to an employee or a worker, means the person by whom the employee or worker is (or, where the employment has ceased, was) employed.”
On 1 February 2017, the Claimants’ served 10 production notices under s.10, NMWA by which they requested wage information from M for the preceding 12 months. That period covered nine months during which the Claimants were employed by M and three months during which they were employed by the respective transferees.
M failed to respond to the production notices within the period of 14 days required by s.10(9) of the NMWA. The Claimants then brought complaints before the ET under s.11 of NMWA for a declaration and award in respect of such failure.
The held that M was the employer within s. 54(4) of the NMWA because it was the “person by whom the employee or worker is (or, where the employment has ceased, was) employed.” There was no longer any contract of employment between M and the Claimants and therefore that employment had ceased. Furthermore, this was supported by the following; M had a continuing obligation to retain records under s. 9 of the NMWA and remained liable to criminal prosecution if it did not do so. There were sound policy reasons why the obligation to produce records rests with the person obliged to make and retain those records during the pay reference periods in question. There were also anomalies which would flow if the liability to answer the production notice transferred. A transferee could become liable even though it it did not have the records to produce; there was no joint liability provisions under TUPE to share the liability between the transferor and transferee.
M appealed on essentially two grounds:
(i) The ET erred because where there has been a relevant transfer the effect of Reg 4(1) of TUPE is that the employment does not cease.
(ii) The ET erred in failing to consider whether the obligation to keep and preserve minimum wage records is itself an obligation that transfers where there is a relevant transfer. The further obligation to produce records, which is parasitic on the obligation to maintain records, must therefore necessarily also transfer.
The EAT, Mr Justice Choudhury (President), held:
In respect of Ground 1 (paras 44 and 45): The ET incorrectly focused on the identity of the employer rather than the key question, which is whether the employment under a contract of employment had ceased. The Claimants did not cease to be employed at any stage. All that happened was that as a result of Reg 4(2) of TUPE, and the resultant statutory novation of the contract, a new employer seamlessly stepped into the shoes of the old. As such, the only part of the definition which applied was that relating to the current employer as at the date that the production notices were served. That employer was the transferee.
In respect of Ground 2 (paras 46 to 50). The obligation to maintain records under the NMWA transfers to the transferee by application of reg. 4(2) which provides that the effect of a relevant transfer is that “all of the transferor’s rights, powers, duties and liabilities under or in connection with any such contract shall be transferred” and “any act or omission before the transfer is completed shall be deemed to have been an act or omission of the transferee.” Furthermore, the requirement to maintain records under the NMWA was not unique. Employers had obligations to keep records in other circumstances. In addition there are other circumstances when transferees may be handicapped by not having access to records.