The recent EAT case of London United Busways Ltd v De Marchi and Abellio London [2024], offers some helpful guidance on the potentially complex legal position where an employee objects to a TUPE transfer (i.e. a transfer under Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246)). In this case, Mr De Marchi’s objection to the TUPE transfer was on the basis that it would result in a substantial change in his working conditions to his material detriment, which gave rise to a question around how his employment should be treated, and which party bears responsibility.
Facts of the EAT Case
Mr De Marchi had been employed as a bus driver by London United Busways Ltd (Busways) for over 20 years, during which time he walked to work, being just 15 minutes from where he lived. Unfortunately, in 2019 Busways lost the contract for operating the bus route on which Mr De Marchi worked to Abellio London Ltd (Abellio). As this amounted to a service provision change, TUPE was engaged, meaning that as a matter of law, Mr De Marchi’s employment transferred to Abellio on the same terms and conditions, unless he objected.
Busways gave affected employees three options:
- Transfer to Abellio and move garage.
- Object to the transfer and sign a new contact with Busways (subject to availability), but maximum time on duty would increase from nine to ten hours.
- Resign
Mr De Marchi asked for redundancy instead because Abellio planned to service the bus route out of a different garage, which was an hour away from his home. The request was refused.
Further correspondence then occurred between Mr De Marchi and Busways, but Mr De Marchi continued to state that he would not accept the transfer to Abellio or sign the new contract with Busways. Eventually Busways confirmed that Mr De Marchi’s employment had transferred to Abellio anyway. Mr De Marchi refused to recognise this, however, and having been signed off with stress, continued to send his sick notes to Busways.
In January 2020, Abellio wrote to Mr De Marchi to discuss his return to work. Mr De Marchi did not reply, and his employment was terminated by Abellio. Mr De Marchi brought claims in the Employment Tribunal against Busways and Abellio.
The Employment Tribunal Decision
The Tribunal found that Mr De Marchi had objected to becoming employed by Abellio under regulation 4(7). Usually, an objection would mean that the objecting employee is not considered to be dismissed by the transferor (and cannot therefore, claim unfair dismissal).
However, in this case, the Tribunal found that the change in Mr De Marchi’s terms and conditions would have been substantial due to the increased travel time. It considered that this change would be to his material detriment. As such regulation 4(9) was engaged. In these circumstances, the employee is treated as having been dismissed by “the employer”.
But who is “the employer” here? Mr De Marchi objected to the transfer, but Busways confirmed he had transferred to Abellio, and Abellio had ultimately terminated his contract, making the answer to that question unclear.
The Tribunal considered that Mr De Marchi had not treated his contract with Busways as having terminated. However, when Busways purported to transfer Mr De Marchi’s employment contract to Abellio, it found that this was a dismissal. As such, liability lay with Busways as the dismissing employer.
Busways appealed against the employment tribunal’s decision and Mr De Marchi cross-appealed.
The Employment Appeal Decision
The EAT agreed that Mr De Marchi was to be treated as having been dismissed by Busways. It also agreed that Abellio was not liable. However, its reasoning differed to the Employment Tribunal. The EAT held that the relevant transfer operated to terminate Mr De Marchi’s employment with Busways due to his objection based on his increased commuting time – which was accepted to be a substantial change in working conditions to his material detriment. Mr De Marchi was therefore, effectively dismissed by Busways on the transfer date.
As part of its decision the EAT helpfully summarised the operation of regulation 4 of TUPE:
- The Employee can choose to treat their contract as terminated where the transfer involves a substantial change in working conditions to their material detriment, but they do not have to. If the employee exercises that right, they will be deemed to be dismissed by the employer.
- If an employee objects to the transfer to the transferee, their employment will not transfer and they will only ever be employed by the transferor.
- Where regulation 4(9) applies but the employee has not chosen to treat their contract as terminated and they have objected to the transfer, no transfer will take place. This means the employee is deemed to be dismissed by the transferor on the transfer date.
It should be noted that as this case was decided before the end of the post-Brexit transition period. As such, it is possible that it would be decided differently now.
Conclusion
This decision helps to clarify the effect of regulation 4(9) of TUPE where the transfer involves a substantial change in working conditions to the material detriment of the employee. It is notable that an employee does not need to clearly communicate that they are treating their contract as terminated under regulation 4(9) as their objection is sufficient to terminate the contract and they will be deemed to be dismissed by the transferor – and it is the transferor who is liable for the dismissal.
On a practical level employers dealing with a TUPE transfer situation should seek to understand why an individual objects to the transfer. It may be that any substantial changes in working conditions could be mitigated and the application of regulation 4(9) may be avoided. If a transferor is aware that proposed changes to working conditions are causing objection(s) and those changes cannot be avoided, to mitigate their liability, the transferor should ensure that the commercial terms include sufficient indemnities.
Ultimately TUPE is tricky and where it is engaged, employers would be well advised to take advice.