Employee objects to transfer – that’s good news isn’t it?

It’s common knowledge in TUPE circles that if an employee generally objects to a transfer their employment terminates by law on the transfer date. It’s not treated as a dismissal.

However, what if the employee also alleges that the transfer involves a substantial change to their working conditions to their material detriment? Is this still a termination in law? Who should be concerned here?

The recent case of London United Busways Ltd v De Marchi addresses this point.

The Law

Regulation 4 (1) of TUPE essentially provides that the contract of employment of any person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to the relevant transfer automatically transfers to the transferee.

Employees can object to the transfer if they do not wish to transfer to the transferee under Regulation 4(7). If they do this Regulation 4(8) says that, subject to Regulation 4(9) and 4(11), this has the effect of terminating their contract by law on the transfer date. They are not treated as having been dismissed in this instance.

Regulation 4(9) says that, if the transfer involves a substantial change in the employee’s working conditions to their material detriment, they may treat their employment as having been terminated. In these circumstances, the employee is treated as having been dismissed by the employer.

Regulations 4(11) says that all of these provisions are without prejudice to the employee’s right to terminate their employment without notice in acceptance of a repudiatory breach of contract by their employer (i.e. constructive dismissal).

The Facts

The Claimant was a bus driver for London United Busways Limited (Busways).  His role was set to transfer under TUPE to Abellio London Ltd (Abellio).

Abellio were going to operate out of a different garage which would have significantly increased the Claimant’s commuting time to and from work (from 15 minutes to one hour).

Busways gave the Claimant three options. He could transfer to Abellio, he could remain with Busways (but would need to increase his working hours) or he could resign. The Claimant asked if redundancy was an option but was told it was not.

There were various correspondence and discussions between the parties. The Claimant maintained throughout that he would not transfer and that none of the options were appropriate for him. Busways applied different approaches, initially saying the Claimant would transfer to Abellio, then saying he had objected to the transfer and then saying he had resigned.  On the transfer date Busways told him he would be transferring to Abellio.

The Claimant brought claims against Busways and Abellio in the Employment Tribunal.

The Employment Tribunal

The Employment Tribunal found that the Claimant had been dismissed by Busways on the transfer date.

It found that the change in garage location was a substantial change to the Claimant’s material detriment.  The Claimant did not transfer to Abellio as he had objected to the transfer but because he had not exercised his right under Regulation 4(9) to treat his employment as terminated, he remained employed and was terminated by Busways on the transfer date due to their assertion that he had transferred.

The Employment Tribunal seemed to be saying, therefore, that the objection was effectively to be ignored where Regulation 4(9) applied and the employee had not exercised his right to treat the contract as terminated.

The Employment Appeal Tribunal

The Employment Appeal Tribunal upheld the Employment Tribunal’s decision but for different reasons.

It found that:

• Where a relevant transfer would involve a substantial change in working conditions to the employee’s material detriment the employee can treat the employment as terminated. If they exercise that right (i.e. leave) then they will have been dismissed by their employer – this would be the transferor pre-transfer and the transferee post-transfer.
• If the employee does not exercise this right then they transfer to the transferee unless they object.
• If the employee objects to the transfer because of the substantial change, they do not transfer to the transferee. Their employment does not continue (even if they do not exercise their right to treat the employment as terminated) as Regulation 4(8) operates to terminate their employment.  However, the second limb of Regulation 4(8) (i.e that this is not a dismissal) is disapplied and they will be deemed to have been dismissed by the transferor.  This avoids the situation where an employee who objects to the transfer because of a substantial change to their material detriment would be left without protection.

Conclusion

This case provides clarification as to the position where an employee objects, claims a Regulation 4(9) right but decides not to treat their employment as terminated.

The objection will operate to terminate the employee’s employment but it will not be a termination in law and will instead be a dismissal be the transferor.  This has to be correct to give the employee adequate protection.

Transferors, in particular, therefore have to be alive to the risk of claims against them in respect of the transferees’ proposed measures.  Transferees are legally obliged to provide transferors with information as to the measures they envisage taking regarding the affected employees as part of the TUPE process.  The transferor is then obliged to share this information with its affected employees.  The risk here is that if any of the measures involve a substantial change to an employee’s material detriment the employee may exercise their right under Regulation 4(9). As this case shows if they object in these circumstances then liability for their dismissal will stay with the transferor even though it had no control over these proposals.  Transferors need to therefore challenge any such measures with the transferee and ensure that transferees are not contacting their employees directly (as some do!).

Our employment lawyers have extensive expertise in TUPE. Please reach out to our employment team who would be happy to help.