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TUPE can catch global transfers but could leave workers empty handed

A law to protect workers when a business changes hands can apply to jobs transferred outside Europe, according to a recent ruling. But British workers could be left jobless and without compensation in such cases, an employment specialist has warned.14 Jan 2008

Advert: Order your copy of the new third edition of Data Protection Law and Practice by Rosemary Jay today.The Transfer of Undertakings Regulations (TUPE) are designed to protect the rights of workers when they are transferred to another company. The Employment Appeals Tribunal ruled for the first time in December that TUPE does apply in cases where ownership of a company passes to a firm outside the EU.

Newell Ltd was a company with a blinds manufacturing business in Tamworth. Its factory was bought by Israel-based Holis Metal Industries, which sought to transfer all its work to Israel. The GMB union, representing employees, objected and said that the companies had not complied with TUPE.

The Employment Appeals Tribunal (EAT) ruled that TUPE can apply when jobs are transferred outside of the EU, though it did not apply it in this case.

But Ben Doherty, an employment specialist with Pinsent Masons, the law firm behind OUT-LAW.COM, said that TUPE could in fact act against workers' interests when jobs are transferred so far away.

"If employees are informed of a transfer abroad, they could object to the transfer," said Doherty. "If they do, this will mean that their employment does not transfer but it will terminate with no right for the employee to be treated as having been dismissed. Accordingly the employee will have no right to a redundancy payment or notice pay."

Doherty said that the alternative – waiting for the transfer to happen then seeking redundancy – is also fraught with problems.

"Alternatively should the employee wait for the transfer to happen and hope that they are made redundant by the new employer? In this instance if the employee is made redundant but does not receive a redundancy payment they will be left to litigate against the new employer. This in turn raises questions of jurisdiction: should the employee litigate in the UK tribunals or in the country in which the new employer is based?"

"It also raises questions of enforcement: if the employee obtains a judgment from a UK tribunal, how does he enforce that judgment against the new employer? At the very least this process will be time-consuming and expensive," said Doherty.

Judge Ansell of the EAT said that he did not have enough facts to rule conclusively on whether the redundancies took place in the UK or elsewhere, so no final ruling could be made. But he did say that he was satisfied that TUPE does apply outside of the EU.

"Set against the purpose of protecting the rights of workers in the event of change of employer it seems to me that a purposeful approach requires that those employees should be protected even if the transfer is to be across borders outside the EU," he said. "It is not a case of either the UK or the EU seeking to legislate outside their jurisdictions without good reason. I am satisfied that the pre-transfer requirement of location in the UK acts as a significant limitation which should that not offend against the comity of notions."

Ansell said that the regulations were vital in an age where outsourcing is an increasingly common and international phenomenon.

"I am also satisfied that the service provision changes brought into the 2006 regulations, where again the only limitation is that there should have been an organised group of employees situated in Great Britain immediately before the service provision change, is clearly aimed at the modern outsourcing of service provision, particularly call centres, whether inside or outside the EU," he said.

Ansell did admit that it would be hard to enforce UK law on an Israeli company, but said that the problem was not unique to this case. "I accept that enforcement may present a problem although I accept [GMB lawyer] Mr Siddall’s argument that enforcement can present a problem even within the EU," he said. "In these days of multi-national corporations and economic inter dependency I would regard the issue of enforcement as less difficult then it used to be – witness the willingness of Holis to submit to the jurisdiction in this case."