Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), when a business changes ownership the new owner inherits the old owner’s ‘rights, powers, duties and liabilities’ relating to the employees of the business. This protects the rights of employees to receive the wages and entitlements to which they are due. Excepting criminal liabilities and certain pension scheme benefits, an employee who is owed unpaid wages or other entitlements can claim them from their new employer even if it was the old employer who had failed to pay. This includes failure to pay the national minimum wage (NMW) or national living wage (NLW).
Up to now in claims for unpaid NMW or NLW by old employers, if HMRC imposed a financial penalty (up to 200% of the arrears, to a maximum of £20,000 per worker) it charged part or all of that penalty to the old employer if it was triggered by wage arrears dating from prior to a TUPE transfer. As of 2nd July 2018, however, this has changed, and such penalties will now be charged to the new employer.
As a result of this change due diligence is now more important than ever for prospective new employers who will inherit employees under a TUPE transfer. Careful checking is needed to make sure that all wages and entitlements due have been paid, or will have been by the time of the transfer. An indemnity should also be obtained against any potential claims, penalties or actions, and it is by far the more prudent option to involve a solicitor in the drafting of this. The old employer should also disclose any ‘court or tribunal case, claim or action brought by an employee’ in the previous two years, and warn of any similar action that they may foresee or consider likely in the future.
Have a question about a TUPE transfer? Contact Alison via email for more information.
