TUPE - Transfer of undertakings outside of the EU, does TUPE still apply?

A case has recently come before the EAT which is the first to consider whether the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) can apply to a transfer of a business which, after the transfer, is based outside the EU.

In April 2006, an Israeli company acquired part of a curtain-making business. The 107 affected staff were told that they would transfer to the new company once the sale of the business had gone through. If they did not wish to transfer to Israel they would be made redundant. None of the employees took up the offer of new employment so they received redundancy payments accordingly.

The key issue in the Employment Tribunal was whether TUPE applies to a transfer of business outside of the EU. The Tribunal held that it did apply, and the matter was appealed to the EAT.

The EAT agreed that TUPE could apply in principle to businesses that are transferred outside the EU. The EAT acknowledged that enforcement of such awards may prove difficult, but this did not prevent TUPE applying.

The EAT acknowledged that legislation should not normally be regarded as having extra-territorial jurisdiction. Reg. 3(1)(a) TUPE, however, granted jurisdiction to the UK courts in this matter as immediately before the transfer the undertaking in question was situated in the UK. The EAT also agreed with the Tribunal's original findings that 'it would be contrary to the protective policy underlying TUPE if workers were deprived of their rights simply by affecting a transfer to a company outside of the UK.'

The EAT did, however, question whether a company retains its 'identity' if it does transfer out of the UK; a key test if TUPE is to apply. The EAT said that this was a matter of fact for each case and should not prevent TUPE applying altogether in international transfers of undertakings.

The case confirms for the first time that TUPE can apply to transfers outside of the UK. This will prevent companies from setting up a non-EU based subsidiary to acquire a company in the UK to circumvent TUPE, and therefore offers increased protection to employees. It should be noted though, that if the acquisition significantly alters the identity of the company in question then TUPE may be deemed not to apply.