When a retailer considers transferring a UK business, or relocating a service currently provided in the UK, to a location outside the UK, it will need to identify the employment law consequences of the proposal at the outset.
The Transfer of Undertaking (Protection of Employment) Regulations (TUPE) can apply to the transfer of a UK business (or relocation of a UK service provision) out of the UK, including to a non-EU country. As this is a point previously untested in UK case law, it is useful that the Employment Appeals Tribunal (EAT) has finally confirmed what has always been our view, namely that TUPE can apply to offshoring (HolisMetal Industries v GMB and Newell, EAT).
Where the transaction is a business transfer, theremay still be an argument that TUPE does not apply on the facts because the undertaking has failed to retain its identity. This could be due to the relocation or due to a large proportion of the employees refusing to relocate. This argument is not available where there is a change of service provider.
Such cases are relatively unusual. Given thatmost employees will not relocate overseas and will therefore lose their jobs whether or not TUPE applies, unions have largely preferred to try and agree with the UK employer to treat such situations as non-TUPE redundancies rather than attempt to enforce redundancy claims against an overseas employer.
It is crucial that retailers identify TUPE issues as early as possible in a proposed transaction. In addition to the cost of redundancy payments, the risks for a UK business wrongly assuming TUPE does not apply include liability for failure to informand consult under TUPE (up to 13 weeks’ pay per affected employee). It will also be liable if employees treat themselves as constructively dismissed prior to the transfer because of the proposed change in location. In some cases itmay be possible tomanage these risks through the use of indemnities fromthe putative transferee or compromise agreements with the employees. Actual dismissalsmade by the transferor would be likely to be automatically unfair (being transfer-connected and not for an economic, technical or organisational reason of the transferor), but liability for these would transfer to the overseas transferee