Lots of TUPE transfers are smooth sailing and for staff, there is no difference to their lives, other than a different logo on the top of their payslip each month. But that’s not always the case. The TUPE Regulations recognise that staff have the right to object to the transfer of their employment. The relevant regulations include:  

• Reg 4(7) which gives an employee a right to object to a transfer. 
• Reg 4(8) then provides that if an employee objects under Reg 4(7), the employment terminates by operation of law with effect from the transfer date. Importantly, the termination is not treated as dismissal and so neither the transferor (the outgoing employer) nor the transferee (the incoming employer) can be held liable for dismissal.  
• Reg 4(9) provides that if a transfer would involve a substantial change in working conditions to the “material detriment” of the employee, the employee may treat their employment as having terminated and in these circumstances, is deemed as dismissed by their employer. The employee has the enhanced protection from dismissal under Regulation 7.

So, if an employee objects to a TUPE transfer, their employment ends and neither the transferor nor the transferee is liable for the termination of that employment. Whereas, if an employee treats themselves as dismissed because, paraphrasing, they were unhappy about a change that the TUPE transfer might make to their working conditions, they can claim unfair dismissal against their employer. 

But what happens when the employee objects to the transfer in circumstances where the transfer involves a substantial change in working conditions to the material detriment of the employee? Is there a dismissal in this situation? If so, which party would be liable for an unfair dismissal claim? A recent Employment Appeal Tribunal decision has helpfully considered this conundrum for us and there are important lessons to learn.  

Case details

Mr De Marchi was employed as a bus driver by London United Busways (LUB). The station he operated from was a 15-minute walk from his home (he did not own a car). In 2019, LUB lost the contract for providing the bus route he worked on and Abellio London Ltd (Abellio) won the contract. The route operated by Abellio was out of a different garage and would have involved Mr De Marchi travelling approximately one hour each way to and from work. The LUB employees were given three options:

1. They could transfer to Abbellio and move garage.
2. They could sign a new contract with LUB subject to the availability of roles and increase their duty hours.
3. They could resign. 

Mr De Marchi emailed LUB informing them that none of the three options were acceptable.  He could not manage the extra travel time to the Abellio garage, it was not in his best interest to stay put and work longer and he did not want to resign. He concluded that the only option was redundancy, and he requested redundancy pay. He was told that redundancy was not possible and that if no response was received his employment would end on account of his objection. 

The transfer took place on 9 November – Mr De Marchi was off sick with anxiety and stress and his sick notes were forwarded to Abellio. Mr De Marchi informed Abellio that he had objected to the transfer and so was sent a P45 confirming his leaving date of 10 November. Following a period of confusion as to whether he was employed by Abellio Ltd, they terminated his contract and Mr De Marchi subsequently brought claims against both LUB and Abellio. At the heart of the claims was how his employment had been terminated.  Was it redundancy? Was it dismissal? Was it by virtue of the transfer? Who was liable? 

EAT ruling

The EAT held that Mr De Marchi’s contract did not transfer to Abellio on 9 November because he had validly exercised his right under Reg 4(7) to object. However, rather than Mr De Marchi’s contract terminating by operation of law and there being no dismissal, the EAT held that the effect of Reg 4(9) was that ‘because Mr De Marchi had objected in circumstances where the transfer would involve a substantial change in his working conditions to his material detriment, he was dismissed by LUB’. It was held that the change in his commuting time would have involved a substantial change in his working conditions to his material detriment. 

Practical tips to take away

• Objections to a transfer aren’t that common given the effect of an objection is the employee’s employment terminates without any redundancy pay or other compensation.  
  • When objections are received, get confirmation of that objection in writing and if the employee has not given a reason, ask them and yourself why they might have objected. 
  • Consider the overall context of the situation - are there any changes that the transfer might involve that staff might be unhappy about? 
  • It is in a transferor’s interest to investigate why the employee is objecting so that they can identify any potential risk of liability for a dismissal.  
     
• Provided that an employee has objected to the transfer in circumstances where the transfer would involve a substantial change to their working conditions to their material detriment, they do not have to make any ‘unequivocal or unambiguous’ statement as to the termination of the contract under Reg 4(9). 
   
• Subject to the commercial reality and bargaining position, it may be possible for a transferor employer to negotiate indemnities from the transferee employer. 
  • The earlier you identify the risk, the sooner you can think about strategies to remove or mitigate the risk, such as offering the employee re-employment in a different part or location of your business. 
     
• Ultimately, an employer that has staff transferring out via a TUPE transfer could be held liable for a dismissal that arises because of something out of their control relating to what the incoming employer intends to do/change. 
  • This may be a consideration, for example, in cases where you are a transferor employer with a sponsorship licence, and you do not know if the transferee employer has or will have a sponsorship licence. 
  • Another example might be where the transfer would involve a change in the workplace of employees or changes to their hours/shift patterns. 

For more information

If you would like to discuss any issues further on this or anything else, please contact me.