In the first case to consider the application of TUPE to an international transfer of an undertaking, the EAT has decided that TUPE can apply, in principle, to an offshoring. This is notwithstanding the fact that the business in question transferred outside the European Union.

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE Regulations) apply to a transfer of a business where the business is situated immediately before the transfer in the UK, and to a service provision change, when there is an organised grouping of employees situated in GB immediately before the service provision change.

The drafting of the TUPE Regulations suggests that the Regulations can apply to international transfers, although neither the TUPE Regulations nor the European Acquired Rights Directive (under which the TUPE Regulations are made) expressly address this point.

The point came to be considered by the EAT in Holis Metal Industries Ltd v GMB and Newell Ltd. 

Newell had a factory in Tamworth where it operated a track, pole and blind manufacturing business, employing 180 employees.  Holis, a company based in Israel, bought the track and pole part of the business.  During the consultation process, it was announced that 107 of Newell's employees were to transfer to Holis and that, if the employees did not move to Israel, they would be made redundant.

None of the employees did move, and they were all dismissed by Holis after the transfer. 

The GMB, the Trade Union representing the employees, as well as Newell, brought claims against Holis for failure to consult under the TUPE Regulations and in relation to collective redundancies.  In considering these claims, the tribunal was required to consider whether TUPE applied to the transfer to Israel.

Decision

The tribunal and EAT agreed that TUPE can apply to transfers outside the UK, including transfers outside the European Union.  The EAT said that the TUPE Regulations apply to transfers of undertakings situated immediately before the transfer in the UK and a purposeful approach requires that employees should be protected even where the transfer is across borders outside the EU.

Implications

This decision has brought some welcome clarity to the area of offshoring but it remains to be seen if it will alter offshoring practices.

TUPE is often ignored in offshoring situations, or is considered but treated as not applying.  Frequently this approach goes unchallenged by employees, as it can be in the interests of the employees to be made redundant by the UK employer rather than be transferred to an overseas employer.  However, parties who continue to ignore TUPE in an international transfer situation do risk exposure to claims under the TUPE Regulations, particularly in relation to protective award claims for failure to consult of up to 13 weeks' pay per affected employee.   

Holis Metal Industries Ltd v GMB and Newell Ltd