Thinking of outsourcing job roles in your company? Here’s what to consider

News of redundancies and layoffs appear to be a frequent occurrence at the moment, with Boeing being the latest company to announce it is cutting up to 2,000 finance and HR employees and instead outsourcing the jobs roles. While Boeing’s headquarters are in the US, it is not clear where the employees at risk of losing their jobs are based. If any of the employees are based in the UK, then the main issues to consider are whether the employees would be redundant; and whether the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) (TUPE) applies.

Given the current economy, it can be expected that many companies may go down this route to cut costs and still get the work done. Companies involved in cross-border outsourcing (offshoring) tend to proceed on the basis that TUPE does not simply treat the UK-based workforce as redundant. The statutory definition of redundancy includes situations where the employer intends to cease to carry on the business in the place where the employee was employed or where the requirements of the business for employees to carry out work of a particular kind in the place where the employee was employed have ceased or diminished or are expected to do so.

Legal considerations for employers

If 20 or more UK-based employees are likely to be made redundant, the collective consultation regulations would apply and this would involve consultation with elected employee representatives and a statutory consultation period of 30 or 45 days, depending on the total number to be made redundant. Consideration would need to be given whether alternative employment is available, among other things, and the fairness or unfairness of the dismissal would be judged according to the standard reasonableness test.

Consideration should be given as to whether TUPE applies, as TUPE imposes specific obligations on employers and provides significant protections for employees, including the automatic transfer of employees, rights of consultation and information, and protection against dismissal.

There is very little case law on the subject, although judicial guidance states that where the undertaking or service being transferred retains its identity following the transfer, it would be a relevant transfer for the purposes of TUPE. However, in most cases the changes to the nature of the undertaking or service once transferred abroad are so significant that the ‘relevant transfer’ test is unlikely to be met and TUPE would not apply.

If the relevant transfer test is met and TUPE does apply, any dismissals connected to the transfer would be automatically unfair unless there was economic, technical or organisational reason entailing changes in the workforce (ETO reason).

In offshoring cases a dismissal arising from the decision to move the location of an undertaking abroad or to transfer a service abroad will inevitably constitute an ETO reason and the fairness or unfairness of the dismissal would be judged according to the standard reasonableness test.

In addition, guidance issued by what was formerly the Department for Business, Innovation and Skills (BIS) states: ‘Where a transfer involves the employer changing the location of its business or part of it, dismissals due to that change will not usually be automatically unfair, even if the employer still needs the same number of staff in the new location. This is providing that the sole or principal reason for the dismissal is an ETO reason, and the dismissal is for redundancy.

If you have any questions about outsourcing jobs within your company, please contact Jacqueline McDermott.