What's the answer? TUPE transfers

Annie Hayes

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What’s the answer? TUPE transfers

By Annie Hayes

This week Nicholas Snowden, Senior Solicitor at Clarkslegal LLP and Helen Badger, employment law expert, Browne Jacobson present their ideas on the rules surrounding TUPE transfers.

The question:
I am currently looking at transferring the activities of one currently UK department overseas (outside of EU). As part of the overall process I am also looking at a more radical solution involving outsourcing completely (also probably overseas).

In both scenarios it is highly unlikely that any of the current staff would wish to relocate to the new location.
My planning assumption has been that any move would involve simply (!!)making the existing staff redundant and hiring in the new location (or rather the other way around due to training needs), and have budgeted generously accordingly.

I am now concerned as to whether, given that the jobs are moving to a separate legal entity in either case, TUPE is involved and if so what the implications might be. In particular are there any procedural matters that I need to take into account over and above normal consultation etc.
Thanks for any help.

John Farrell

The answers:
Nicholas Snowden, Senior Solicitor at Clarkslegal LLP

Outsourcing within the EEA:
TUPE or Transfer of Undertakings (Protection of Employment) Regulations 1981, is a piece of domestic legislation which is derived from the European Acquired Rights Directive. However, the principles which underpin TUPE apply in all European Union and European Economic Area (EEA) states.

Outsourcing outside the EEA:
As regards outsourcing outside the EEA, whether TUPE applies is uncertain. In theory, the wording of the TUPE Regulations allows for this possibility, however, there is no case law on the subject and practical difficulties abound for employees seeking to enforce TUPE rights. Also, as you have indicated, it is likely that few, if any, existing staff will want to move so far.

You are right that in the event that none of your existing employees want to make the move to the new location, the situation will be quite straightforward i.e redundancy dismissals after appropriate information and consultation in the UK and recruitment of new staff in the chosen location. From a practical point of view, you will want to be sure that none of the current employees wants to relocate before you finalise recruitment numbers in your chosen location, to avoid ending up with too many staff.

Procedurally, from an employment law perspective, there will be nothing to do beyond:

Information and consultation and;

Notification of the DTI (If there are 20 or more employees affected)

One risk which exists under TUPE for your business, is that a constructive unfair dismissal claim could be brought before a transfer, based on an anticipated fundamental change to the terms of employment (e.g the requirement to work in India). However, there is not much you can do to reduce this risk as outsourcing abroad is the whole point of the exercise. The only thing you can do is inform and consult with your staff fully.

The other major issues will be the business issues you are no doubt currently tackling, concerning how to recruit effectively and maintain the culture and standards of your business, so that customers/clients continue to be happy with the services you provide after the outsourcing.

Finally, whichever country you choose to outsource to, it will be important to obtain a broad overview of local employment law from a specialist, so that you do not get any nasty surprises, or miss any opportunities offered by the laws of that country.

Nicholas Snowden can be contacted at nsnowden@clarkslegal.com

Helen Badger, employment law expert, Browne Jacobson

In both scenarios it is highly unlikely that any of the current staff would wish to relocate to the new location.

My overriding advice would be that as you are dealing with extremely complex issues, seek specific legal advice on your options before taking any action. In answering your query here, I can only touch the surface of the complexities involved.

The Transfer of Undertakings (Protection of Employment) Regulations 1981 (“TUPE”) apply to a transfer from one person to another of an undertaking which was situated immediately before the transfer in the United Kingdom.

There is nothing in the Regulations which stipulates that in order for the regulations to apply, the transfer must be within the UK.

Whether TUPE applies in your case will depend on how you proceed with the reorganisation. If you were to simply relocate the department without a change of employer, then TUPE would not apply. This would fall within the statutory definition of redundancy.

However, you suggest that in transferring the department overseas, the identity of the employer would change. In these circumstances, TUPE would apply. It would also apply if you opt for outsourcing.

TUPE has the effect of transferring the contract of employment (along with all duties and liabilities under that contract) of all employees employed in the part of the business being transferred. Where TUPE applies, the Transferor (i.e. the current employer) has a legal duty to inform and consult appropriate representatives – e.g. trade union representatives, where there is a recognised union. (If none, employees should be given the opportunity to elect appropriate representatives).

To do this, you must observe the following steps:

• inform the employees that the transfer is to take place, when it will occur and why, the legal, economic and social implications of the transfer, and the transfer measures (any material change in existing working practices or working conditions) which both your company and the transferee intend to take.

And, where transfer measures are to be taken:

• consult with the employee’s representatives; this must involve hearing the views of the representatives and replying to them before reaching final conclusions.

Under TUPE, any employee can object to a transfer. This brings the contract of employment to an end, and the employee will not normally be treated as having transferred to the new employer. In normal circumstances, TUPE provides that the employee is then left without remedy.

However, in the case of a fundamental change such as a transfer overseas, an employee objecting to the transfer may not be left in this position, as the transfer will result in a substantial and detrimental change to their working conditions.

This potentially gives the affected employees the right to resign and claim constructive dismissal. An alternative option might be to make your employees redundant, of course making appropriate redundancy payments.

Where TUPE applies, any dismissal connected with the transfer is automatically unfair. However, where the dismissal is for an economic, technical or organisational (“ETO”) reason, entailing changes in the workforce, this is not automatically the case.

The substantial location change you envisage is likely to constitute an “ETO” reason, thereby offering a defence against unfair dismissal claims should you make redundancies. However, you would still be bound to inform and consult as explained above.

TUPE rules defining the grounds for unfair dismissal claims, and on who is responsible for any dismissal, the transferor or transferee, are incredibly involved. To reiterate, I strongly advise you seek legal advice tailored to the complexities of your transfer.

Helen Badger can be contacted at hbadger@brownejacobson.com

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