Brexit Bites - Part 4: Looking overseas

Clearly there will be some industry sectors that will be harder hit by Brexit than others. There has been much talk of concerns from the financial services sector since passporting (essentially the right to carry out business across the EU from a branch in any one member state), which is allowed by virtue of the UK’s participation in the common market, will likely no longer be possible after the UK leaves the European Union.

With this in mind, some companies might consider the merits of transferring their business (or indeed part of it) overseas to another group company. So, will TUPE apply to cross-border transfers and can staff be TUPE transferred to another country within the EU? 

TUPE or not TUPE?

As you might expect, the position is far from simple. Case law suggests that if there is a business in Great Britain before the transfer, TUPE could apply. However, even where it does apply, employees’ terms and conditions (including location) are preserved, so where the business moves, the staff will not necessarily follow. 

What happens next?

Let’s say TUPE applies. The employees are likely to have a right not to be forced to transfer overseas, but the change in location is also likely to amount to an economic technical or organisational (ETO) reason entailing changes in the workforce, allowing for potentially fair redundancy dismissals (provided they are made by the transferee employer after the transfer). Cue: TUPE consultation, followed by redundancies and, depending on the numbers involved, collective redundancy consultation under the Trade Union and Labour Relations (Consolidation) Act 1998 (TULRCA).

Employees who wish to move with the business will be able to agree to a change of location on the basis that there is an ETO reason for the change, which entails changes in the workforce.

Alternatively, if TUPE does not apply, there may be no business left in the UK post-transfer. Cue: redundancy consultation, including collective redundancy consultation if the numbers are sufficient. The likelihood is that either TUPE and/or redundancy consultations will need to take place. The obligations under TUPE and TULRCA are not materially different.  Now that the transferee employer is able to consult the transferor’s employees before the transfer about post-transfer redundancies, the two processes can to a large extent usually be run in tandem. 

What else?

This is really just the tip of the iceberg. The above is a generic overview of the position but in reality businesses will have to consider carefully the implications and costs of transferring a business overseas. 

There are numerous other factors that businesses might need to consider: Would TUPE place any restrictions on the ability to hire on local terms and conditions? How does this tie in with European Works Council consultations? What local immigration issues might arise once the UK has exited from the EU?

As always, there is no substitute for sound legal counsel.