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Case Study
A new Employment Appeal Tribunal (EAT) decision makes clear that where an employee objects to a TUPE transfer because of a substantial and materially detrimental change to their working conditions, the transferor -and not the transferee- will be regarded as having dismissed them.
For those who deal with transfers of undertakings, this is an important case. As a quick reminder, the Transfer of Undertakings (Protection of Employment) Regulations (“TUPE”) operate to transfer an employee from transferor to transferee on their existing terms and conditions. This is known as the automatic transfer principle.
An employee can object to the transfer (under Regulation 4 (7)) but their employment then terminates on the transfer date and- in most circumstances- this will not be treated as a dismissal. They therefore have no right to bring an unfair dismissal claim. However, if the transfer involves a substantial change in their working conditions (to their material detriment) then the employee is entitled to object to the transfer and treat themselves as dismissed by “the employer” under Regulation 4 (9).
In this case, Mr De Marchi had worked as a bus driver for over 15 years for London United Busways Ltd. The garage at which he worked was a short walk from his home and he did not own a car. When a new company (Abellio London Ltd) took over the contract for the bus route on which he worked, he and another 50 bus drivers were due to transfer along with the contract from Busways to Abellio.
Busways (the transferor) told Mr De Marchi that the transfer would require him to work from a garage that was an hour away from his home. The only alternative they gave him was to resign. He asked instead to be made redundant and to be paid redundancy pay. Busways declined and Mr De Marchi objected to the transfer. His employment was treated as having ended the day before the transfer took effect- with the transferor saying that this was because of his “resignation”. However, Mr De Marchi had not resigned but had in fact objected to the transfer.
Case Study
Mr De Marchi brought claims against Busways (the transferor) and Abellio (the transferee). The Employment Tribunal (“ET”) had to decide whether Mr De Marchi had in fact been unfairly dismissed and, if so, who was liable.
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. The ET found that -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).
The case was appealed to the Employment Appeal Tribunal (“EAT”) which agreed with the ET’s judgment, but for different reasons. It found that Mr De Marchi’s contract did not transfer to Abellio due to his objection as per Regulation 4(7). Further, the transfer to Abellio operated to terminate Mr De Marchi’s employment with Busways by reason of that objection and therefore Mr De Marchi was to be treated as having been dismissed by Busways and they were therefore liable for his dismissal.
In this case, the change was known ahead of the transfer date but the EAT did say that in cases where it only became 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 would then be liable.
Our advice would be to communicate clearly with staff on any transfer and its implications. Be clear on options and whether someone is objecting or resigning. These are different things.
Clear communication and consultation will also help to identify any concerns over planned changes and to take steps to address these in good time.
It is often assumed that liability will pass to the transferee, but this case warns us that the transferor will not necessarily escape liability. If you find yourself in the role of transferor in a TUPE situation, you should seek indemnities to cover liability for these types of dismissals due to detrimental changes to working conditions from the incoming transferee.
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