The decision of the Employment Appeal Tribunal (EAT) in London United Busways Ltd v (1) Mr. V. De Marchi (2) Abellio has clarified the extent to which employees are protected when they object to a TUPE transfer due to a substantial and materially detrimental change in working conditions.

Background

The Transfer of Undertakings (Protection of Employment) Regulations 2006 ('TUPE') protect employees' rights when a business changes hands or where there is a change in service provider. Employees assigned to the undertaking or service being transferred transfer to the transferee on their existing terms and conditions (with limited exceptions).

Where an employee does not want to transfer, they can object by informing either the transferor or transferee (regulation 4(7)). In this case, the employee will not transfer to the transferee and their employment will be deemed to be terminated at the transfer date without a dismissal or resignation (regulation 4(8)).

If the transfer involves (or would involve) a substantial change to an employee's working conditions to their material detriment, the employee can treat their employment as terminated (regulation 4(9)). If they exercise this right, they are viewed as dismissed by the employer (the transferor or transferee depending on whether the election is before or after the transfer). 

This case involved an analysis of the tricky interplay between regulations 4(7) and 4(9) where an employee objects to a transfer by reason of a substantial change in working conditions to their material detriment but does not treat their contract as having been terminated.

Facts

Mr De Marchi was employed as a bus driver by London United Busways Ltd ('the transferor') working at their Stamford Brook garage. The garage was a 15-minute walk from his home. In 2019, the transferor lost the contract for Mr De Marchi's route to Abellio London Limited ('the transferee'). As a result, he was in scope to transfer to the transferee under TUPE.

Mr De Marchi was given three options:

  1. Transfer to the transferee under TUPE and work at their Battersea garage which would require one hour's travel time;
  2. Object to the transfer and sign a new contract with the transferor at the original location with increased maximum daily working time; or
  3. Resign.

Mr De Marchi objected to the transfer but did not treat his contract as terminated. He made it clear that he did not accept any of the options and cited the increased commuting time as a substantial and materially detrimental change to his working conditions. Eventually, after an exchange of correspondence during which his request for redundancy was refused, the transferor told Mr De Marchi that his employment would transfer since he did not accept the alternative employment offered. Post-transfer, Mr De Marchi continued to send his sick notes and sick pay requests to the transferor and refused to contact the transferee as he did not consider them to be his employer. The transferee ultimately dismissed Mr De Marchi due to lack of engagement.

Mr De Marchi raised a claim for unfair dismissal and related TUPE claims against both parties.

Decision

As a preliminary issue both the employment tribunal and the EAT decided that Mr De Marchi's employment had not transferred to the transferee and that he had been dismissed by the transferor. The EAT's reasons were as follows:

  • Under regulation 4(7) if an employee objects to a TUPE transfer, their contract does not transfer to the transferee. The employee's contract of employment terminates but it is only treated as a dismissal if regulation 4(9) applies.
  • Moving to a different garage with significantly increased travel time constituted a substantial and materially detrimental change to Mr De Marchi’s working conditions under regulation 4(9). 
  • When an employee objects to a transfer due to a substantial change in working conditions to their material detriment, the transferor is treated as having dismissed them. This is the case whether or not the employee has chosen to terminate their contract.
  • On this basis Mr De Marchi’s employment had not transferred to the transferee. He was dismissed by the transferor and was not entitled to any remedy from the transferee.

This decision highlights the importance of distinguishing between a general objection to a TUPE transfer and one based on detrimental changes under regulation 4(9). 

Outcomes

  • Parties involved in a TUPE transfer should be aware that where an employee objects to the transfer this can result in a dismissal by the transferor if the transfer would involve a substantial materially detrimental change in working conditions. It will be the transferor who is liable for the dismissal costs even where those result from the transferee's detrimental working conditions.
  • The transferor should handle any objections to a TUPE transfer with caution and consult about the reasons and whether anything can be done to mitigate the situation – otherwise, if regulation 4(9) applies, they may be liable for potential unfair dismissal and redundancy pay claims.
  • The transferor should consider seeking indemnities from the transferee addressing liability for deemed dismissals due to substantially detrimental changes to working conditions.

For more information about anything discussed in this blog, please contact the Brodies Employment and Immigration team. Workbox by Brodies, our HR and employment law site, has practical information and resources on TUPE transfers, including example letters and checklists.

Contributor

Danielle Taylor

Senior Solicitor