Zaman and others v Kozee Sleep Products Ltd (t/a Dorlux Beds UK)
Kozee Sleep Products Ltd bought Dorlux Beds UK when it went into administration. This purchase constituted a "relevant transfer" for the purposes of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) and Dorlux's existing employees transferred to Kozee.
Various employees bought a claim under reg.15(8) and 15(9) of TUPE alleging that neither Dorlux nor Kozee had complied with their information and consultation obligations under regs.13 and 14 of TUPE. At the employment tribunal, their claims were upheld and each employee was awarded 13 weeks' pay.
In deciding what constituted a "week's pay", the tribunal looked at reg.16(4), which refers to ss.220 to 228 of the Employment Rights Act 1996. Section 227 of that Act caps a week's pay in relation to a number of claims at the statutory limit, which at the time was £350. Kozee was successful in arguing that the protective awards should be subject to the statutory cap.
The employees appealed, claiming that the cap on a week's pay is not applicable to claims under reg.15 because s.227 specifically sets out a number of claims to which it applies and reg.15 of TUPE is not among them.
The Employment Appeal Tribunal (EAT) agreed with the appellant employees. The EAT found in favour of a literal interpretation of s.227, which contains a list of claims to which it applies. A reg.15 claim is not expressly listed in that section as being subject to the statutory cap and, therefore, the EAT held that the calculation of a "week's pay" in such claims is uncapped.
In coming to this conclusion, the EAT was persuaded by three main factors:
1. Under TUPE 1981, it was generally accepted that the statutory cap did not apply to payments made under the equivalent of reg.15(8), and no intention to change that position was flagged by draftsmen at the time of drafting TUPE 2006.
2. Section 190 of the Trade Union and Labour Relations (Consolidation) Act 1992, which, in a similar way to reg.16(4), refers to "Chapter II of Part XIV of the 1996 Act" (which contains s.227) has always been understood by tribunals that such awards are uncapped.
3. There was no other admissible evidence to show that the secretary of state intended the cap to apply in these circumstances.
This case clarifies something that has previously been widely assumed: protective awards for a breach of information and consultation obligations under TUPE are uncapped. The attempts of Kozee's lawyers to persuade the tribunal that reg.16(4) is subject to the statutory cap by referring to s.227, which they argued contained a non-exhaustive list of claims subject to the cap, were not successful.
Such claims continue, therefore, to pose a very high risk for employers in terms of value and underline the importance of undertaking an open, honest and thorough consultation process on all TUPE transfers.
Mary Clarke, employment partner, DLA Piper