Zaman v Kozee Sleep Products Ltd (trading as Dorlux Beds UK)

The statutory cap on a week's pay in section 227 of the Employment Rights Act 1996 does not limit compensation awarded under regulation 15(8) of the Transfer of Undertakings (Protection of Employment) Regulations 2006.

A reference to sections 220 to 228 of the 1996 Act incorporates the calculation mechanism only so far as the individual provisions apply. Section 227 specifies the awards to which its cap applies and does not include TUPE compensation. A change from the established uncapped position would require clear statutory wording.

The appellants were employees affected by the transfer of a business from Dorlux to Kozee. An Employment Tribunal found breaches of TUPE's information and consultation obligations and awarded compensation equivalent to 13 weeks' pay.

When some compensation remained unpaid, the Employment Tribunal made further awards under regulation 15(10). For three employees, the Employment Judge applied the £350 weekly cap in section 227 of the Employment Rights Act 1996 and refused a review.

The employees appealed. The central issue was whether the section 227 cap applied to compensation under regulation 15 of TUPE through regulation 16(4).

1. Appeal allowed. The Employment Appeal Tribunal held that the section 227 cap did not apply to awards of compensation under regulation 15(8) of TUPE.

2. Regulation 16(3) defines appropriate compensation as a sum not exceeding 13 weeks' pay which the tribunal considers just and equitable, having regard to the seriousness of the employer's failure. Regulation 16(4) provides that sections 220 to 228 of the Employment Rights Act 1996 apply for calculating a week's pay.

3. Section 227(1) does not impose a universal cap on every payment calculated by reference to a week's pay. It identifies specific awards and payments, including certain awards under the 1996 Act, but not TUPE compensation. The cross-reference in regulation 16(4) therefore applies section 227 only so far as its provisions are applicable.

4. The legislative context confirmed that construction. Under the previous TUPE regime, the equivalent compensation was generally understood to be uncapped. Protective awards under section 190 of the Trade Union and Labour Relations (Consolidation) Act 1992 were likewise understood to be uncapped. Those awards and TUPE compensation were cognate and served similar purposes, as illustrated by Sweetin v Coral Racing [2006] IRLR 252.

5. If the Secretary of State had intended to introduce a cap, clear wording would have been expected, either by amending section 227 or by expressly applying its limit in TUPE. No such clear indication appeared in the Regulations or the preparatory materials. The principle against doubtful penalisation therefore added nothing because the meaning was sufficiently clear.

6. The awards were substituted without remission: £9,100 for Mohammed Zahur, £13,000 for Mohammed Zaman, and £9,100 for Shahed Zaman.

• Employment Appeal Tribunal: allowed the appeal against the Employment Tribunal's refusal to review the awards and substituted increased sums.
• Employment Tribunal: on 12 February 2010 applied the section 227 cap to three employees' compensation awards and, on 3 March 2010, refused a review.