The High Court case of Hagen v ICI Chemicals (19 October) may sound a note of caution to employers when they are deciding what to tell employees about pensions on a TUPE transfer.
Based on the preliminary reports we have seen so far, the issues arose on the transfer by ICI of part of its business. The claimant employees were concerned about their pension benefits as ICI employees enjoyed better benefits than elsewhere in the industry and these would not transfer automatically under TUPE. However, they accepted the transfer after being reassured by ICI that the pension benefits provided by the receiving employer would be broadly similar to those provided by ICI.
Following the transfer the claimants alleged that both ICI and the receiving employer had made incorrect representations in relation to a number of issues, including the pension position. Claims for negligent misstatement were made against ICI and the receiving employer and against ICI alone for breaching various implied provisions in the employment contract.
It was held that there was no justification for saying that there was a general or contractual duty to make employees aware of their pension rights. The duty of care on an employer was to take reasonable care in making any statements it chose to make.
Here ICI had breached their duty of care by negligently misstating the position in relation to pension benefits as some of the claimants would have been as much as 5% worse off after the transfer. In the view of the judge, "broadly similar" meant that benefits should have been within 2% of the value of the ICI benefits. Had the complainants been aware of the true position they would have required ICI to negotiate something more favourable. The exclusion of occupational pension rights under TUPE meant that responsibility for ICI's misstatements about pensions did not pass to the new employer.
Once the full judgement is available, we will let you know if any other points arise or if it casts any further light on the above points.
For further information on Pensions please contact Mark Atkinson by telephone on +44(0)20 7367 2184 or by e-mail at mark.atkinson@cms-cmck.com or for information on Employment please contact Simon Jeffreys by telephone on +44(0)20 7367 3421 or by e-mail at simon.jeffreys@cms-cmck.com
