The EAT, in the case of Holis Metal Industries v GMB and Newell, has confirmed that the TUPE regulations may apply to an outsourcing of business or service provision to a site that would otherwise be outside the jurisdiction of the UK Courts.

According to the wording of TUPE Reg 3 there is a 'relevant transfer' where 'immediately before the transfer' there is an ‘undertaking… situated immediately before the transfer in the UK’ or (in the case of a service provision change) there is an ‘organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out of the activities concerned’.

Reg 3(4) (c) specifically states that TUPE may apply to a transfer of an undertaking (which may also be a service provision change) where persons employed in the undertaking business, or part transferred, ordinarily work outside the UK.

However, any undertaking must still retain its identity as an economic entity post-transfer for TUPE to apply.

In Holis, the transferor, which had a factory in England, sold part of its manufacturing process to the transferee which moved the business to premises in Israel. The factory in England was closed down. The employees did not want to move to Israel and so were made redundant by the transferor. The GMB union brought a claim on their behalf against both transferor and transferee claiming that this was a TUPE transfer and that there had been a failure to inform and consult with the work force both under TUPE and under the Trade Union and Labour Relations (Consolidation) Act 1992. Under TUPE the transferee would be jointly and severally liable with the transferor for such a failure.

The EAT has now confirmed the Employment Tribunal’s decision that the recent rewriting of the TUPE regulations was clearly aimed at the modern outsourcing of services whether inside or outside the EU and that TUPE should apply in such a case. The employees could proceed with a claim for failure to inform and consult against the Israel-based transferee.

Points to note:

  • In practice (as the EAT admits) this is unlikely to be an issue that arises often. The employees in such a case are far more likely to want redundancy and to make any claims about failure to consult etc against a UK-based transferor than to want to insist that their contracts (and all claims) automatically transfer to a non-UK based transferee.
  • However, where the number of employees is so small that the 1992 Act rules on consultation do not apply, or where (as in Holis) the transferor post-transfer is an empty shell, the employees might want to use TUPE to mount a claim for failure to inform and consult against the transferee.

No transfer of liability for post-transfer reference

In Coutinho v Vision Information the employee was dismissed by the transferor just before the business transfer took place. Relying on the TUPE regulations he brought claims of unfair dismissal and race discrimination against the transferor and the transferee (the transferee being included as a respondent because the transferor's obligations had passed to it under TUPE and because the transferor was no longer trading and had no assets). His claims succeeded.

During the course of the Tribunal proceedings the transferor had offered to give the employee a reference. However, the wording of the reference could not be agreed and the employee then brought a fresh claim against both transferor and transferee alleging discrimination by victimisation for failure to provide a suitable reference. He argued that the transferee could again be made liable for the transferor's defaults because, on a TUPE transfer, all the transferor’s rights and duties as employer were automatically passed on to the transferee.

The Employment Tribunal and the EAT disagreed.

Any obligation on an employer to provide a reference only arises when that reference is requested. So the claim only arose when the issue of the reference was raised.

TUPE cannot apply to a breach of duty that occurs after the relevant transfer has taken place and so no claim in respect of the reference could be made against the transferee.

Points to note:

  • This is a rare example of a situation where the transferor in a TUPE transfer may still have an obligation to the employee post-transfer that does not pass automatically to the transferee.
  • However, the EAT noted that, if the employee had asked the transferee directly for a reference (presumably only likely where the transferor has ceased to exist altogether), the transferee might be under an obligation to respond.