The Transfer of Undertakings (Protection of Employment) Regulations (TUPE) were introduced in 1981 to protect employee rights and continuity of employment where the business in which they work is transferred from one employer to another. TUPE was amended in 2006 to cover ‘service provision changes’ which include most situations where services are outsourced, reassigned or brought back in-house. TUPE applies where the undertaking is situated in the UK immediately before the transfer (in the case of a business transfer) and (in the case of a service provision change) where there is an organised grouping of employees situated in Great Britain immediately before the service provision change (Regulation 3(1) and 3(3)). Provided this is the case, TUPE will apply even if the transfer is governed by or effected under the law of another country, the employment of the transferring employees is governed by foreign law, or the employees subject to the transfer ordinarily work outside the UK (Regulation 3(4)).
Newell Limited (‘Newell’), which had a factory in the UK, sold part of its manufacturing business to Holis Metal Industries Limited (‘Holis’), a company based in Israel. None of the employees in the business moved to Israel and all were made redundant by Holis shortly after the transfer. The GMB started proceedings against both Holis and Newell for breach of the duty to consult with appropriate representatives of the affected employees, as required under Regulation 13 of TUPE. On the issue of the applicability of TUPE outside the UK and the EU, the EAT held that TUPE can apply to a transfer from the UK to another jurisdiction (whether inside or outside the EU). The EAT found that in the light of the purpose of TUPE, which is to protect the rights of workers in the event of a change of employer, a ‘purposeful approach’ required that the employees affected should be protected even if, after the transfer, the undertaking is based outside the UK. The pre-transfer requirement of location in the UK was sufficient to give jurisdiction to UK courts. The EAT also held that the fact that TUPE could govern transfers with an international element was clear from the wording of Regulation 3(4) TUPE and from the 2006 ‘service provision change’ provisions which are clearly aimed at outsourcing both inside and outside the EU.
Effect on employers
Although commentators have already expressed the view that TUPE is likely to apply to overseas transfers, this case is useful as it is the first judicial comment on the issue. It serves as a warning for UK employers who outsource or offshore services overseas that TUPE may apply to these types of transaction. Employers should therefore ensure that they fully consider the potential application of TUPE and its implications in international business transfers or outsourcing / offshoring situations (although the practical importance of this decision remains to be seen, as enforcement of a tribunal award against a company or business based overseas could prove difficult).