The Transfer of Undertakings (Protection of Employment) Regulations 2006 exist to protect employees when the business they work for changes hands. The idea is simple: employees shouldn’t lose out just because their employer sells or outsources the business. TUPE aims to preserve continuity of employment, transferring employees (on their existing terms and conditions) to the new employer as if their contract had always been with them.

TUPE generally applies where there’s a ‘relevant transfer’. Two different types of transfer are recognised:

  • a sale of part or all of the business; and
  • a service provision change – where a service ceases to be carried out by one person and is taken over by another. This type of transfer covers outsourcing and insourcing of services.

However, complications arise when that transfer crosses borders. Perhaps a service that previously operated in-house has become the responsibility of a business operating outside of the UK (something which has become particularly common with IT services). Or perhaps a business has been bought by a company operating outside the UK which proposes to move the undertaking itself abroad. Let’s consider some of the common questions arising in these circumstances.

Does TUPE still apply?

Yes – if the transferor (the person selling or, in an outsourcing situation, the organised grouping of employees) is situated in the UK at the time of the transfer. This is the case even if the transferee (the person buying or, in an outsourcing situation, the incoming service provider) is overseas or will perform the services from overseas after the transfer. UK case law (including Holis Metal Industries Ltd v GMB) confirms that what matters is where the transferring entity is based at the point of transfer – not where the transferee is located.

This means the outgoing UK employer will be required to follow the TUPE process: informing and consulting affected staff, and transferring employees on their existing terms. Dismissals connected to the transfer may be automatically unfair unless there is an economic, technical or organisational (ETO) reason justifying the change.

What if the transferee is outside the UK or will provide the services from outside the UK?

Here’s where things get difficult. TUPE requires the transferee – even if based abroad – to take on the employees with their existing UK-based rights and protections. In practice, this creates several complications:

  • Jurisdictional enforcement: UK employees who transfer to an overseas company may struggle to enforce their rights in the destination country, especially if that jurisdiction doesn’t recognise TUPE-style protections.
  • Redundancy: If the business or service is moving overseas as part of a transfer then jobs are likely to cease to exist in the UK after the transfer and there will be a potential redundancy situation. However, the seller/outgoing provider can’t ‘fairly’ make these redundancies as the redundancy situation doesn’t ‘bite’ until the point of transfer – and they can’t rely on the transferee’s ETO reason to construct a fair dismissal. These matters are often dealt with commercially and pragmatically so you should engage with the transferee early to work out a plan. This might involve:
    • pre-transfer offers of re-deployment;
    • the seller/outgoing provider running the redundancy process but holding off on giving notice until the point of transfer;
    • the use of objections to transfer and tri-partite settlement agreements to reduce risk.

In all cases, the seller/outgoing provider will want clear and enforceable protection in the corporate documentation in the form of appropriately worded indemnities and warranties.

Can the transferee ‘opt out’ of TUPE?

No. TUPE has a mandatory effect and cannot be contracted out of. Affected employees are the only people who are able to ‘opt out’ of TUPE and they are only likely to do so if they are being offered an alternative role or adequate compensation for doing so.

What should UK employers do?

UK transferors planning to move a business abroad must tread carefully. They should:

  • Consult with employees early and transparently. Factor in time for TUPE consultation, and collective redundancy consultation where that is triggered.
  • Take advice at an early stage on how TUPE interacts with employment law in the transferee’s jurisdiction.
  • Consider indemnities to tie the transferee to their TUPE obligations and thrash out any bespoke commercial agreement reached.
  • Explore at an early stage whether relocation proposals are realistic and fair, or if redundancies in the UK are more appropriate.