The end of 2024 saw a TUPE decision which clarifies the effect of regulation 4(9) of TUPE.
Regulation 4(9) of TUPE allows employees to treat their contract as terminated if a transfer results in substantial change to their working conditions to their material detriment. But is it the transferor or transferee that is considered the "employer" responsible for the dismissal in such cases?
Automatic transfer and the right to object
Under TUPE employees automatically transfer to the transferee under their existing contracts of employment, and any rights and liabilities under or in connection with those contracts will transfer too. An employee can object to the transfer. If they do, their contract will not transfer to the transferee and their employment will end with effect from the transfer date. There is no dismissal by the transferor.
The facts in London United Busways v De Marchi
Mr De Marchi, a bus driver employed by London United Busways Ltd (Busways), faced a significant increase in his commute time when the contract transferred from Busways to Abellio London Ltd (Abellio) – it went from 15 minutes to an hour.
Busways gave the affected employees the option of transferring to Abellio which would require moving garage; objecting to the transfer and signing a new contract with Busways (subject to availability), with an agreement to increase their maximum time on duty by an hour; or resigning if neither option was acceptable.
Mr De Marchi did not want to take any of those options – he argued the only option for him was redundancy. Busways said this wasn’t an option. After some to-ing and fro-ing, Busways wrote to Mr De Marchi advising him that his employment ended on 8 November 2019 by reason of his resignation. When he responded saying he had not resigned, Busways wrote again to say that he would be transferring to Abellio on 9 November 2019. He responded saying that he had not resigned, he would not sign a new contract and he would not transfer under TUPE.
When the transfer to Abellio took place, Mr De Marchi was signed off sick due to anxiety and depression. His sick notes were sent to Busways who forwarded them to Abellio. Abellio eventually wrote to him explaining that he had automatically transferred to them by virtue of TUPE and invited him to a meeting to discuss his return to work. Mr De Marchi did not respond and remained off sick. Abellio wrote to him stating that a decision had been taken to terminate his employment.
The decision
Mr De Marchi brought employment tribunal claims against both Busways and Abellio. At a preliminary hearing, the Employment Tribunal concluded that Mr De Marchi had been dismissed by Busways on 8 November 2019.
The Employment Appeal Tribunal (EAT) agreed. As the transfer would involve a substantial change in working conditions to Mr De Marchi's detriment (due to the extended commute time) he was entitled to treat the contract of employment as having been terminated. The fact that he did not treat it as having been terminated did not mean that he withdrew his objection. His objection was sufficient to terminate the contract and for him to be treated as having been dismissed by Busways. Busways was, therefore, liable for the dismissal.
The EAT then considered the position of an employee in the same situation who doesn't object. It held that such an employee would be required to communicate the fact that they treated their contract as having been terminated unequivocally and unambiguously pre-transfer in order to be considered to have been dismissed by the transferor. If they failed to do so until after the transfer, then they would be considered to have been dismissed by the transferee.
Implications for transferors and transferees
So what's the message when it comes to dealing with employees where a transfer involves a substantial change in their working conditions to their material detriment?
Transferors will be liable for dismissal if an employee objects but does not clearly communicate unequivocally and unambiguously that they are treating their contract as terminated.
Transferees will be liable for dismissal if there is no objection and no unequivocal or unambiguous communication pre-transfer that the employee is treating their contract as having been terminated.
Action points:
- Ensure clear communication with employees about transfer options and consequences.
- Document any objections or communications regarding contract termination.
