Moves abroad

Holis Metal Industries Ltd v GMB and Newell Ltd (IDS 845)

The 2006 Transfer of Undertakings (Protection of Employment) Regulations protect the rights of employees when a business is transferred within the UK. But what about cross-border sales? In Holis Metal Industries Ltd v GMB and Newell Ltd (IDS 845), the Employment Appeal Tribunal (EAT) said that the regulations apply as long as the undertaking was located in the UK immediately prior to the transfer.

Basic facts

The GMB represented 76 workers at a track, pole and blind manufacturing business owned by Newell. In February 2006 the works council was informed that Holis Ltd (an Israeli company) was interested in buying the track and pole parts of the operation.

Later that month, they were told that the business would transfer on 9 April and that unless they wanted to move to Israel, they would be made redundant. None did.

The GMB claimed that both companies had failed to consult as required under the TUPE regulations. Holis Ltd argued that the claim should be struck out because TUPE did not apply to “off-shoring situations”.

Relevant law

Regulation 3 of TUPE states that any transfer of a business “situated immediately before the transfer in the United Kingdom” is covered by TUPE. This includes any “service provision changes” if “immediately before the change there is an organised grouping of employees situated in Great Britain.”

Regulation 3(4) (b) states that TUPE applies to a transfer or service provision change if the transfer “is governed or effected by the law of a country or territory outside the United Kingdom or that the service provision change is governed or effected by the law of a country or territory outside Great Britain.”

Tribunal decision

The tribunal said that the applicability of TUPE should be decided “only by location of the business” to be transferred. On a plain reading of regulation 3, that meant that TUPE applied to the transfer of any undertaking or business situated in the UK immediately before it transferred. This was clearly also consistent with the wording in the Acquired Rights Directive (the European directive from which the regulations derive).

In this case, as both the transfers and redundancies took place in the UK and the pole and track part of the business was “situated immediately before the transfer in the UK”, TUPE applied to this transfer.

The employment judge emphasized that “it would be contrary to the protective policy underlying both TUPE and the Directive if workers could be derived of their rights simply by affecting a transfer to a company outside the UK”.

EAT decision

And the EAT agreed. It said that the wording in both regulation 3 and the directive was quite specific - that TUPE applies to transfers of businesses located immediately before the transfer in the UK.

And as the whole point of TUPE is to protect the rights of workers the EAT said that it should take “a purposeful approach” so that employees were protected “even if the transfer is to be across borders outside the EU”. It was confident that this interpretation would not involve either the UK or the EU legislating outside their jurisdictions as “the pre-transfer requirement of location in the UK acts as a significant limitation”.

The EAT also considered it significant that regulation 3(4) “makes it clear that an international element can be governed by TUPE and 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.”