Xerox Business Services Philippines Ltd v Zeb UKEAT/0121/16/DM
Where an employer decides to offshore a function, the employees working in that function in the UK will transfer under TUPE with all their terms and conditions intact – but may then be made redundant, as there will be no work for them to do at their old location.
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) apply to business transfers where the undertaking is situated in the UK immediately before the transfer, and to service provision changes where there is an organised grouping of employees situated in Great Britain immediately before the service provision change.
Dismissals for a reason connected to a transfer or service provision change are automatically unfair unless they are for an economic, technical or organisational (ETO) reason entailing changes in the workforce.
The Claimant worked in Xerox UK’s Finance Accounting Team in Wakefield, under a contract which gave his place of work to be “Leeds or Wakefield”, or any other location within a reasonable commuting distance from his home.
In 2014, the Xerox Corporation decided to offshore some work from Xerox UK to the Respondent in Manila. Xerox UK and the Respondent agreed that there would be a TUPE transfer on 1 October 2014. The requirement for work done overall by the Finance Accounting Team had not ceased or diminished, but the requirement for employees to do that work in Wakefield had.
All the employees in the Finance Accounting Team in Wakefield were given a choice: to object to the transfer, and then to be made redundant on more generous terms than the statutory minimum requirements, or to transfer under TUPE to the Respondent. If they chose the latter, the Respondent had no requirement for them in Wakefield and they would be made redundant with statutory minimum redundancy payments. If they would prefer to relocate to Manila, they would be offered employment on local terms and conditions of employment, including salary.
The Claimant did not object to his transfer, and on 1 October wrote to the Respondent, saying:
“I do not accept that my position has been made redundant as the parent company still has a presence in the UK. I am prepared to relocate to the Philippines to do the job and I am entitled to be taken on with the same terms and conditions. Why am I not able to work in the Philippines?”
If the Claimant had transferred on his UK terms and conditions, he would have been entitled in real terms to nearly 10 times the salary of locally recruited Manila employees.
The Respondent said that he had transferred under TUPE with all his terms and conditions of employment, including location. He was employed to work in Leeds or Wakefield, not the Philippines.
On 8 October, the Claimant and Mrs Bone of the Respondent held a consultation meeting. There was a vacancy in the Philippines but Mrs Bone rejected his request to transfer to Manila on his UK terms and conditions, because the purpose of the offshoring was to make cost savings. On 9 October, the Claimant was dismissed and paid a statutory redundancy payment, a payment in lieu of notice and untaken holiday entitlement.
The Claimant brought a successful unfair dismissal claim. The Employment Tribunal found that there had been a variation to his contract of employment to permit a change of location, and that he was therefore entitled to work in the Philippines on his UK terms and conditions, including salary. Since there was no cessation of work, his dismissal could not be a redundancy and the real reason for his dismissal was that he wanted to remain on his current terms and conditions following the TUPE transfer.
The Employment Appeal Tribunal disagreed.
TUPE applied to the transfer, since the operation had been situated in the UK although it would not be after the transfer. Therefore, the Claimant’s employment was subject to TUPE and would transfer to the Respondent on the same terms and conditions. He could not pick and choose those terms – while his salary would be unchanged by the transfer, so too would his place of work. There was no variation of the location clause in his contract.
There was a genuine redundancy situation, since the Respondent did not need a financing accounting employee in Leeds or Wakefield. The Employment Tribunal had failed to properly consider why the Claimant was dismissed. Had it done so, it was likely that the answer to that question was that the needs of the business for employees carrying out that work in Wakefield had ceased, and that he was redundant. Redundancy is an ETO reason. The Employment Appeal Tribunal remitted the case back to a fresh Employment Tribunal to consider this further, and if so whether correct redundancy procedure was followed.
What to take away
The case confirms that TUPE applies to off-shoring, but that employees transfer on exactly the same terms and conditions and may therefore be at risk of redundancy if there is no longer a requirement for that type of work at that particular place.
Employers should consult with employees, which may include consideration of relocation, but the usual redundancy rules apply. If a genuine redundancy situation arises and a proper consultation process is followed, the dismissal will be fair.