This article considers whether a relevant transfer under TUPE reg. 3 can apply to the transfer of a UK business to a transferee based somewhere else in the world, to which country the business had been outsourced. Given the growth in off shore outsourcing this is a very important question which most businesses fail to pay attention to closely when considering their duties of consultation under TUPE.
TUPE refers to the Transfer of Undertaking (Protection of Employment) Regulations 2006. These regulations effectively put the transferee employer in the same position as the transferor, so that the rights and obligations contained in the contract of employment made between the transferor are automatically passed to the transferee. Hence the transferee is under a statutory obligation to honour their contracts of employment. In the event that the transferee refuses to honour their contracts of employment, the employees transferred over can claim unfair dismissal at the employment tribunal and receive damages.
The question that then arises is the extra territorial effect of TUPE; does it apply say to a business that moves its operations say in India or Israel ? Some may find this question indeed surprising and may think that the answer is fairly obvious, but the case law on this is no so clear cut as I shall discuss in this article.
TUPE regulation 3(1) (a) state that " the regulations apply to a transfer of undertaking, business or part of an undertaking or business situated immediately before the transfer in the United Kingdom to another employer, where there is an economic entity which retains its identity".
The Case of Holis Metal Ltd v GMB and another (2008) IRLR 187 considered the point of the jurisdictional scope of TUPE [1] .
The EAT stated " given that the relevant legislation is intended to protect employees in the event of a change of employer, a purposeful approach requires that those employees should be protected even if the transfer is to be across borders outside the EU",
According to the above case theory there is jurisdictional effect of TUPE beyond the EU as long as there is a transfer of any group of resources or employees that is situated "before the transfer" in the UK. This is in reality means that TUPE applies to various "of shoring" situations. It seems to make sense in that if TUPE did not have extra territorial effect then it would make the regulations mean less as companies could in theory set up an overseas subsidiary company to avoid the scope of TUPE. It seems that our friends in Europe envisaged this scenario as a possibility and hence deliberately left the regulations open.
In practical terms the Holis Metal case presents problems for most employees caught up in this TUPE scenario, as, effectively once they have been transferred by the regulations any claims that they have in the employment context reverts to the transferee, so they would then have to rely upon the recognition to their employment rights given in the contract that they have now been transferred to. This can present problems as most countries have different employment law protection rights which are not on the par to the UK or even the EU. Effectively this would leave the employees transferred in a far worse position since they would be compelled to make claims for unfair dismissal against a foreign employer who may not accede to the UK law.
In order to not be left in limbo and high and dry after the transfer, employees who are put in a similar scenario should resign and claim constructive dismissal if their contracts of employment would be breached if a transfer took place under TUPE against the transferor. What is important is that the resignation of the employee has to take place before the transfer actually occurs (University of Oxford v (1) Humphries and (2) associated Examining Board (2000) IRLR 183).
It is interesting to see how this area develops from the ruling in the Holis Metal Industries case v GMB and Another (2008). Only time will tell what the European Court of Justice interprets as being the correct approach to be applied in such scenarios and whether the case of University of Oxford v (1) Humphries and (2) associated Examining Board (2000) can be applied to the 2006 TUPE regulations.
Meera Yagnik
Barrister
Temple Court Chambers
Copyright
[1] I thank XpertHR for providing me with useful material for the above article (IRS Employment Review issue 895, 14/04/2008).
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