When work transfers overseas, what happens to the staff (and does TUPE apply)?

When work moves overseas at the same time as transferring from/to your organisation, what happens to the staff? Does TUPE apply and, if so, does a transferring employee have to be offered a role overseas on the same UK terms? The judgment of the Employment Appeal Tribunal in Xerox Business Services Philippines v Zeb has provided some helpful clarity on these difficult questions.

The facts

Mr Zeb worked for Xerox UK Ltd in Wakefield in a finance accounting team. The Xerox Corporation decided to offshore the finance accounting team’s work to Manila and to transfer it to their Philippine company. Mr Zeb argued that, as he transferred to the Philippine company under the Transfer of Undertakings (Protection of Employment) Regulations, he must do so on his existing terms and conditions and, as a result, the new employer was required to allow him to relocate to the Philippines on his UK package. Xerox was willing to allow him to relocate to Manila, but they would only do so if he accepted a salary comparable to other Manila-recruited colleagues (being nearly ten times less than UK pay). After he was dismissed as redundant, Mr Zeb brought an unfair dismissal claim and succeeded at Tribunal.

The Employment Appeal Tribunal has now overturned that unfair dismissal finding. It confirmed that it was right that TUPE applied to transfer Mr Zeb’s employment, even though the operation was moving out of the UK. However, the application of TUPE required the post-transfer employer to employ Mr Zeb on the terms of his contract — which meant at Wakefield on the same salary. TUPE did not entitle Mr Zeb to vary the place of work in his contract, whilst also retaining protection of his old salary. The Tribunal who heard his claim should have focussed on why he was dismissed — with the likely answer to that question being because the needs of the business for employees carrying out Mr Zeb’s particular work in Wakefield had ceased (being redundancy, which can still be fair even when related to the TUPE transfer).

What does this mean for me?

Struggling to identify how the law applies practically to employees when a function is being transferred off-shore, is a common problem faced by those off-shoring work, as well as those newly providing the service. This case reminds us that TUPE may well apply, but provides some reassurance about what that really means. If a genuine redundancy exists because the work is no longer required at the employee’s UK establishment, the dismissal can be fair. Whilst TUPE normally means that terms and conditions cannot be changed detrimentally as a result of the transfer, it does not require an organisation to allow an employee to move with the work abroad whilst retaining the UK pay. TUPE might apply, but so do normal redundancy principles.

This is however not quite the end of the story. The case has been sent back to be heard by a new Tribunal to decide whether the actual reason for dismissal in this case was redundancy (albeit that’s likely) and whether the dismissal was fair. What is done to try to avoid redundancy and identify suitable alternative employment is part of the question of fairness, so this Judgment doesn’t mean that you can just ignore the possibility of relocation. This judgment does not remove the need to think carefully about relocating employees (and to consult with them) where work transfers, but it does mean that you are unlikely to be obliged to allow them to relocate abroad whilst keeping pay well above the relevant local rate.

Comment

TUPE applies when an undertaking transfers, including when contracting out, re-contracting or bringing back in-house. There is surprisingly little case law on the issue of off-shoring and TUPE, so this Judgment is important in re-confirming that TUPE will apply even where the undertaking is moving abroad. That may be very important in establishing which organisation in a transfer situation is responsible for the redundancy process, and who needs to pay redundancy/notice. However, this decision is reassuring in emphasising that the usual redundancy rules apply even where TUPE is also in place, so a move of location can still mean that dismissals are fair. This applies whether the function is moving within one country or to another.