In Xerox Business Services Philippines Inc Ltd v Zeb (UKEAT/0121/16), the Employment Appeal Tribunal (EAT) considered an employee's insistence on retaining his UK pay upon proposed relocation. The issue arose when a UK company's finance function was moved to its Philippines-based sister company, rendering the UK finance staff potentially redundant.
Xerox UK Ltd and a Philippines-registered Xerox subsidiary were both companies within the overall Xerox Corporation. Mr Zeb worked in the UK finance accounting team with a contractual workplace of Leeds or Wakefield, or reasonable commuting distance from these locations.
The group parent company, Xerox Corporation, decided to move the UK-based finance function in which Mr Zeb worked to its Philippines subsidiary, closing the finance operation at the UK subsidiary. The UK finance employees were told that their employment would be deemed to transfer to the Philippines subsidiary by operation of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) but (also in accordance with TUPE) their location of work would remain as Leeds, Wakefield, or a reasonable commuting distance therefrom – and as such, the Philippines subsidiary was likely to make them redundant following the transfer due to the cessation of work of the type done by Mr Zeb and his colleagues at the UK location.
As an alternative to this outcome, in respect of which only statutory redundancy would be paid, the employees were offered the option of objecting to the transfer and accepting an enhanced redundancy package from the UK subsidiary (which was more than they would otherwise be legally entitled to, with a TUPE transfer rejection otherwise equating to an ordinary resignation).
A further alternative was offered in the form of the employees taking a role based in Manila on local Philippines terms and conditions.
Mr Zeb did not object to the transfer and opt for the enhanced pay off but instead sought to argue that as Xerox Corporation still had a presence in the UK he was not redundant; that this was simply a change in location and one that he was willing to move to Manila to accommodate but that he expected to remain on his previous terms and conditions if he did so (ie his UK pay, which was approximately 10 times local pay in Manila).
Following the transfer Mr Zeb was made redundant by the Philippines subsidiary, receiving statutory redundancy pay only, and he brought a claim of unfair dismissal.
Employment tribunal decision
Mr Zeb was successful in the employment tribunal (ET), winning his unfair dismissal claim, with the judge finding that the real reason for his termination was in fact how expensive he would have been to keep as an employee, rather than because his role was genuinely redundant. The ET also found that there had been an agreed change of location, constituting a permitted variation of contract terms under Regulation 4(5) of TUPE, and that consequently Mr Zeb's pay levels prior to the transfer had to be protected by operation of TUPE. The Philippines subsidiary appealed to the EAT.
Employment Appeal Tribunal decision
The EAT upheld the appeal.
It found that, as the parties had not agreed to the terms of the relocation proposed by Mr Zeb, no Regulation 4(5) TUPE permitted change of location variation had taken place. In any event, the Philippines subsidiary had become Mr Zeb's employer after the transfer, and was required only to employ him on his UK terms, including his UK location, on his UK pay; not at a new location on his UK pay. TUPE protected Mr Zeb's employment rights before the transfer, which did not include the right to relocate, and TUPE did not give him the right to insist on the terms of a relocation.
Mr Zeb's proposal to transfer to Manila on his UK terms was just that – a proposal, and TUPE did not force the Philippines subsidiary's agreement to this, which they explicitly did not give. The offer made to Mr Zeb was a role in Manila, on local terms and conditions, which he rejected. As such, the EAT found that no variation of contract could be deemed to have taken place, as at no point was agreement reached between the parties on this issue. The EAT found that the ET had erred in suggesting that the employee could somehow forcibly maintain his pre-transfer pay levels through the protection of TUPE, while also forcing through a change in location not provided for under his contract.
The EAT also found that the ET's decision was flawed in respect of the questions it was required to answer on the issue of redundancy being put forward as the fair reason for dismissal. These questions were: (i) had requirements for work of the kind undertaken by the claimant, in his location, ceased; and (ii) was that cessation the principal reason for the claimant's dismissal?
While on the facts accepted at the first stage, both questions appeared to have been answered in the affirmative, the employment judge had focused incorrectly on the reasons the company had for not employing Mr Zeb in Manila on his UK terms, which was not the issue it was required to deal with, and was simply an issue Mr Zeb had sought to force onto the table – not the proper legal question to be addressed in order to decide whether or not he had been unfairly dismissed. As such, the EAT also allowed the Philippines subsidiary's appeal on this point.
The EAT further noted that the ET should have assessed whether or not Mr Zeb's dismissal was automatically unfair for being a dismissal solely or principally caused by the TUPE transfer (Regulation 7 of TUPE), and if so, whether the exception applied. The cessation of Mr Zeb's team's function in the UK would appear to sit squarely within the Regulation 7 exception to such cases of automatic unfair dismissal (where an economic, technical or organisational reason entails changes to the workforce). In any event, the EAT held that only after establishing the position under Regulation 7 of TUPE and the application of the exception should the ET have then considered the "ordinary" unfair dismissal tests set out above (and it should have considered them correctly, which it did not in this case).
The EAT judge hinted that he would have found in favour of Xerox in this case if he were to substitute a decision for that of the ET, describing their appeal as "strong", but decided that given the factual assessment required this was a task properly undertaken by a fresh ET so the case was remitted.
This decision provides helpful clarity that employers managing a cross-border TUPE transfer out of the UK in similar circumstances cannot be forced to replicate domestic terms and conditions if employees opt to move to the new location abroad where such a move is offered. Any such international move, unless already provided for pre-transfer in the employee's contractual location clause, would require agreement between the parties as to the terms going forward, which TUPE does not entitle the employee to dictate.