Employment Review - February 2008
In the first Review of 2008, we examine some recent cases with an international dimension, but with growing relevance to UK employers.
TUPE can apply to transfers outside the UK
Two recent decisions arising from the dismissal of non-UK nationals in relation to their right to work in the UK highlight some important issues
Dr Kelly was a US Citizen employed by the University of Southampton
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TUPE can apply to transfers outside the UK
With the increased outsourcing of services and call centres overseas, employment lawyers have been waiting for some time for a decision as to whether TUPE applies to transfers of undertakings outside of the UK.
The works council at Newell Limited was informed that Holis Metal Industries Limited (Holis), a company based in Israel, was interested in buying part of the business. A letter was issued stating that the jobs in that part of the business would go to Israel and the relevant workers were told that unless they agreed to move to Israel, they would be made redundant following the transfer.
The GMB lodged claims on behalf of its members for a failure by Holis to comply with its obligations under TUPE. Holis made an application for a pre-hearing review to strike-out those claims on the basis that they had no reasonable prospect of success.
The Tribunal refused this application and Holis appealed to the EAT. The EAT did not decide whether in this particular case TUPE applied since it felt that a closer examination of the facts (and in particular the timing of the redundancies) was required. However, the EAT did carry out an analysis of the law in this area and came to the conclusion that TUPE potentially applied to transfers of businesses outside of the UK.
The 2006 TUPE Regulations broadly set out two definitions of the transfer of an undertaking:
1. The traditional “transfer of an undertaking” relates to “an undertaking or business situated immediately before the transfer in the United Kingdom”.
2. A service provision change applies where immediately before the service provision change, “there is an organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client”.
There is no reference in either definition to the location of the undertaking after the transfer. Having analysed the law, the EAT came to the view that there was nothing within the 2006 TUPE Regulations, nor in the 2001 EU Acquired Rights Directive on which the Regulations were based, that restricted their territorial scope.
Provided the undertaking was situated in the UK prior to the transfer, TUPE could apply. Interestingly, whilst the particular case did not involve an outsourcing of a service, the judge giving the EAT’s decision commented that, “I am 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”.
Holis Metal Industries Ltd v GMB and Newell Limited EAT/0171/07
Two recent decisions arising from the dismissal of non-UK nationals in relation to their right to work in the UK highlight some important issues
Ms Klusova worked for the London Borough of Hounslow (”Hounslow”). She had a Russian passport and, at the time she was engaged by Hounslow, had a Visa which was due to expire on 15 May 2004.
On 14 May 2004 she made an application to the Home Office for leave to remain in the UK. She did not receive an immediate response and carried on working after the expiry of her Visa.
On 1 March 2005, the Immigration Service sent an email to Hounslow stating that Ms Klusova did not have permission to work in the UK, was an “over-stayer” and was liable to be detained. She was subsequently detained by the Police and released on bail. Hounslow asked Ms Klusova for documentary proof that she was entitled to work in the UK, which she failed to produce. Hounslow was given a copy of her bail conditions by the Immigration Office and this stated that she was prohibited from taking employment. She was therefore dismissed without Hounslow following the statutory dismissal procedure.
In November 2005 the Home Office confirmed to Ms Klusova that it had received her application for indefinite leave to remain (made in May 2004) and that her original leave was deemed to be extended until her application was refused. She brought a claim for unfair dismissal.
Hounslow pleaded that her dismissal was fair on two alternative counts:
1. She had been dismissed because her continued employment would have contravened a statutory restriction and to continue employing her would therefore have been illegal (the “statutory illegality” defence). If the reason for dismissalis statutory illegality, there is no requirement to follow the statutory dismissal procedure.
2. She had been dismissed for “some other substantial reason” justifying dismissal, as Hounslow genuinely believed that to continue to employ Ms Klusova would contravene a statutory provision.
The matter proceeded to the Court of Appeal. The Court of Appeal held that there was sufficient evidence for the Tribunal to make the factual finding that Ms Klusova had made a valid in time application which resulted in an extension of the period she was legally entitled to remain and work in the UK pending the outcome of the application. She could not therefore be considered to have been dismissed on grounds of statutory illegality because it would not have been illegal to continue to employ her (even though the Immigration Office had given the impression that it would be).
The EAT found that Hounslow did have a genuine belief that Ms Klusova was not entitled to work in the UK and that this therefore amounted to “some other substantial reason” for the dismissal.
The dismissal was therefore for a potentially fair reason. However, it was procedurally unfair as Hounslow had failed to follow the statutory dismissal procedure.
Klusova v London Borough of Hounslow [2007] EWCA Civ 1127
Dr Kelly was a US Citizen employed by the University of Southampton.
Her employment for 60 months from 11 January 2001 was approved by the Overseas Labour Service. However, the Visa in her passport granted leave to remain only until 8 January 2005.
Dr Kelly’s contract of employment therefore stated that her employment beyond 8 January 2005 was dependent on her gaining leave to remain and work in the United Kingdom. Dr Kelly was told by the immigration authorities that she could not apply for indefinite leave to remain in the UK until 11 December 2004 and that the application would take a long time to process. She told the University’s Personnel department about this issue on 5 January 2005. On 13 January 2005 the University’s Immigration expert suspended Dr Kelly without pay stating that if her leave to remain was not extended by 4 February 2005 the University would have no option but to terminate her employment.
Dr Kelly applied for indefinite leave to remain which was in fact granted on 7 February 2005. In the meantime, the University had sent a letter dated 27 January 2005 terminating her employment with effect from 8 January 2005.
Dr Kelly claimed unfair dismissal.
The EAT held that in this case, it would not have been a contravention of the statutory restriction to continue to employ Dr Kelly because she had “permission to work in the UK” until 11 January 2006. The EAT rejected the University’s argument that once leave to remain had expired, any permission to work should no longer be regarded as permission to work.
It therefore held that since Dr Kelly was permitted to work under the Immigration rules despite the expiry of her leave to remain, the University would not have committed a criminal offence by employing her. This meant the University could not rely on statutory illegality as the reason for her dismissal. As such, the statutory dismissal procedures applied and Dr Kelly’s dismissal was automatically unfair.
The EAT added that it was not always reasonable to dismiss an employee when an employee’s continued employment would contravene a statutory provision.
Kelly v the University of Southampton UKEAT 0295/07
Both of these cases highlight an important dilemma for employers. On the one hand, the immigration laws impose criminal liability on employers who employ individuals with no right to work in the UK. The temptation for employers is therefore that as soon as they discover, or suspect, that an individual does not have the right to work in the UK, they dismiss immediately in order to avoid criminal liability.
The Employment Courts in these two cases, however, highlight the need for employers to carry out proper enquiries into the circumstances of the particular employee. If the employer wishes to rely on the statutory illegality defence, it will have to establish that an employer would actually be in contravention of the law by continuing to employ, rather than simply reasonably believing they would be in contravention of statute. Relying on the statutory illegality defence and ignoring the statutory dismissal procedures is therefore done at the employer’s peril.
Recent work in which we have been involved includes:
• Successfully defending a national transport company in a multi-day race discrimination claim
• Presented seminars on “Age discrimination - one year on” and “Executive Recruitment, Service Agreements & Severance”
We have strengthened our employment team with three new appointments.
Vanessa Di Cuffa has joined as a Senior Associate in our Birmingham office, Joanna Lowndes-Yates has joined as a Senior Solicitor in Leicester and Sarah Gonem has joined us as a Solicitor in our Nottingham office.
With effect from 1 February 2008, certain statutory limits have changed. A week’s pay (mainly used for calculation of redundancy payments) is now capped at £330. The maximum compensatory award for unfair dismissal has risen from £60,600 to £63,000.
‘Employing non-UK nationals: an essential guide for the food industry’
Monday 10th March, 12.00 - 3.30pm
The White Hart Hotel, High Street, Boston, Lincolnshire
The seminar is free and includes a buffet lunch.
The speakers include, Andy Hogarth, MD, Staffline Recruitment who recruit workers from Eastern Europe;
Employment Specialist, Joanne Kay (Freeth Cartwright LLP);
Immigration Specialist, Thal Vasishta from Paragon Law and Bev Smith, Head of Community Development, Boston Borough Council.
Employment Updates:
6th March - Derby 12.30 - 2.00pm (including lunch)
12th March - Nottingham 12.30 - 2.00pm (including lunch)
21st April - Leicester 12.30 - 2.00pm (including lunch)
For further details or to book a place on any of these events, please contact Julie Scheller at Freeth Cartwright LLP on 01159 369 369.