A recent Employment Appeal Tribunal (EAT) decision makes clear that where an employee objects to a TUPE transfer due to a substantial, and materially detrimental, change to their working conditions, the transferor, and not the transferee, will be regarded to have dismissed them.

Objecting to a transfer under TUPE

The purpose of the TUPE regulations is to protect the affected employees' employment and TUPE operates to transfer their employment from the transferor to the transferee on their existing terms and conditions. However, the EU Acquired Rights Directive, which TUPE implements, acknowledged that there may be circumstances in which an employee does not want to transfer. As a result, TUPE contains several exceptions to the automatic transfer principle:

• An employee may object to the transfer (Regulation 4(7)). If they do so, their employment terminates on the transfer date and, in most cases, they will not be treated as having been dismissed. This means that an employee who objects to a transfer cannot bring an unfair dismissal claim.
• If the transfer would involve a substantial change in the employee's working conditions, to their material detriment, the employee may treat their employment as having been terminated and they will be treated as having been dismissed by "the employer" (Regulation 4(9)).
• An employee may also resign without notice and claim constructive dismissal if "the employer" has committed a repudiatory breach of contract (Regulation 4(11)).

Background

The case concerned Mr De Marchi, who had been a London United Busways Ltd (Busways) bus driver since 2003, working from a garage that was 15 minutes' walk from his home. Mr De Marchi did not have a car. In 2019, Abellio London Ltd (Abellio) took over the contract for Mr De Marchi's bus route, which triggered a TUPE transfer of 58 bus drivers from Busways to Abellio. Busways wrote to Mr De Marchi offering him three options. The first was to transfer to Abellio, which would require him to work from a garage that was an hour away from his home. The second was to sign a new contract with Busways, with the caveat that the new Busways contract would increase his maximum time on duty from 9 hours to 10 hours. Alternatively, he was given the option to resign.

Mr De Marchi did not wish to choose any of these three options and instead made it clear that he wished to be made redundant and to be paid redundancy pay. Busways did not agree to the redundancy and Mr De Marchi went off sick due to stress and anxiety. As Mr De Marchi objected to the transfer, Busways told him that his employment was ending the day before the transfer took effect due to his resignation. Mr De Marchi wrote to Busways stating that he had not resigned but that he would not transfer to Abellio or sign the new contract with Busways. Busways said that, in that case, his employment would transfer to Abellio since he did not wish to accept the alternative employment it had offered. After the transfer had taken place, Mr De Marchi sent sick notes to, and requested sick pay from, Busways, who forwarded the sick notes to Abellio.

Tribunal claim

Mr De Marchi subsequently brought claims against Busways and Abellio. The Employment Tribunal (ET) had to determine whether Mr De Marchi had been dismissed and, if so, whether Busways or Abellio had dismissed him. The ET found that because Mr De Marchi would have had to travel significantly further if he were to transfer to Abellio's garage, this would have been a significant change to his material detriment. The ET also concluded that Mr De Marchi had objected to the transfer but had not treated his contract as having been terminated. As a result of the objection, his employment could not transfer to Abellio and, by not treating his employment as having been terminated, this kept his employment with Busways continuing until Busways dismissed him by seeking to transfer his employment to Abellio (despite Mr De Marchi's objection).

EAT's decision

On appeal, the EAT ultimately agreed with the ET, albeit their reasons differed slightly. It held that:

• Mr De Marchi's contract did not transfer to Abellio due to his objection under Regulation 4(7);
• the relevant transfer operated to terminate Mr De Marchi's employment with Busways by reason of his objection; and
• Mr De Marchi was to be treated as having been dismissed by Busways, against whom any liability must lie.

The EAT made it clear that (provided the employee did not object to the transfer) if it becomes apparent after the transfer that it will involve a substantial change in working conditions to the employee's detriment, the employee may treat their employment as having been terminated by the transferee, who will then be liable if a tribunal finds the dismissal was unfair.

The EAT's decision concerned events that took place before the end of the UK-EU transition period, so it is possible that a future case could come to a different conclusion. However, UK courts can still use EU law as an external aid for interpreting domestic law.

Key takeaways

From a practical standpoint, this case highlights the importance of clear communication with employees about their options when a transfer is going to take place. Consulting with them about planned changes may help to flush out concerns and provides an opportunity for the parties to take steps to mitigate any issues.

If you are a transferor in a TUPE situation, you should consider seeking indemnities from the transferee (or client) to cover liability for deemed dismissals due to detrimental changes to working conditions.