Employers’ Duty to Keep Records Relating to the National Minimum Wage and TUPE

Employers have a duty to keep sufficient records to establish that their workers have received the national minimum wage. These records must be kept for three years from the end of the pay reference period immediately following that to which the records relate, and this obligation continues after the employment has ceased.

Where a worker believes that they have been underpaid, they can require their employer to produce pay records. If the employer fails to do so within 14 days, a tribunal can award the worker up to 80 times the relevant minimum wage rate.

Does this duty to keep records remain with a transferor after a TUPE transfer, or is it assumed by the transferee? In a recent case, Mears Homecare Limited v Bradburn, the Employment Appeal Tribunal held that it is assumed by the transferee.

Ten employees whose employment had transferred from Mears Homecare to a new employer served notices on Mears Homecare seeking pay information relating to a period of employment with them. Mears Homecare failed to respond within the necessary 14 days so the claimants issued tribunal proceedings, and the tribunal ordered them to pay each of the claimants £600. Mears Homecare appealed against this decision.

The effect of TUPE is that there is no termination of employment, and for most purposes the transferee (i.e. the new employer) merely steps into the shoes of the transferor (i.e. the previous employer – in this case Mears Homecare) as regards the claimants' contracts of employment. There are some exceptions to this. For example, criminal liability does not transfer, and nor do old age, invalidity and survivors' benefits under occupational pension schemes. The Employment Appeal Tribunal decided in this case that there is no exception regarding the obligation to keep and produce minimum wage records: it transfers along with other obligations, duties and rights of the transferor under or in connection with the contracts of employment to the transferee.

The Employment Appeal Tribunal acknowledged the practical inconvenience of the transfer of minimum wage record-keeping obligations for both transferors and transferees, but offered practical suggestions for dealing with it. Transferees can ensure that they receive full pay records from the transferor by including specific contractual protection. Transferors, who remain criminally liable for wilful failure to pay the minimum wage, should require the transferee to deliver pay records to them in the event of prosecution.

When does TUPE apply?

TUPE applies where there is a “relevant transfer”. There are two definitions of this term. Put simply, one applies where there is a “business transfer” and the other where there is a “service provision change” (i.e. where services, such as cleaning or catering services, are outsourced, taken over by a second (or subsequent) generation out-sourced services provider or taken back in-house).

A business transfer will usually occur when a business, or part of a business, is sold. It will also often occur when there is a change in the occupier of a building from which a business is run, such as a pub, restaurant, hotel or shop, and the new occupier continues to use the premises for the same purpose – even where the new occupant has not done any kind of deal with the previous occupant regarding the transfer of the business.

We would encourage anybody who is involved in a situation where TUPE might apply, whether as a transferor or transferee, to obtain advice from a suitably qualified and experienced lawyer in order to ensure that their rights and interests are protected.

Our company and commercial, commercial and agricultural property and employment teams are well versed in TUPE and the wider commercial aspects of relevant transfers. If you have any queries about TUPE, contact us here.