For the first time, the UK's Employment Appeal Tribunal (EAT) in the Holis decision has stated that the rights of UK workers may be protected even if the outsourcing provider is outside the EU. As call centres, data processing, helpdesk and other IT functions are all now commonly outsourced by UK businesses to non-EU destinations the EAT decision is significant.

The Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE") regulates not just the initial outsourcing but also second generation transfers to new providers and also the outsourcing customer bringing the services back in-house. If TUPE applies it will impact on the timing and cost of the outsourcing as:

  1. both the customer and provider will be liable to pay compensation if they fail to properly inform and consult with the representatives of affected employees;
  2. the provider will inherit all rights, liabilities and obligations in relation to the transferring employees; and
  3. transfer-connected dismissals may be automatically unfair and so give rise to claims by affected employees.

This issue however is far from resolved. The EAT's comments although highly influential will not be binding on future courts. Depending on the circumstances it is still possible to argue that TUPE does not apply to an outsourcing. Alternatively, employees and their unions may be able to be persuaded to agree with the UK employer that TUPE does not apply to any redundancies as the affected employees will then avoid the complication of making redundancy claims against the non-EU outsourcing provider.