In more detail

Facts

This case arose from the retendering of a bus route in London that adversely affected one of the drivers on the route (DM). DM was employed by London United Busways Ltd (LUBL; the transferor). LUBL lost the contract to Abellio London Ltd (Abellio; the transferee), which would involve a change in depot.

DM lived 15 minutes’ walk from the LUBL depot where he started and finished his route. Following the transfer of the route to Abellio, he would have had to operate from a depot over one hour away. For these reasons, DM objected to transferring to Abellio, insisting instead that LUBL should make him redundant.

TUPE

TUPE contains a specific right for employees to object to transferring, which can be for any reason. The consequence of objecting is that the employment will not transfer. Instead, it terminates on the transfer date, and is not treated as a dismissal; it effectively operates like a resignation.

Employees also have a right under TUPE to treat their employment as terminated if there has been or would be a substantial change in working conditions to their material detriment. This situation is treated as a dismissal.

The effect of objecting is subject to the right to treat employment as being at an end because of an actual or proposed substantial change in working conditions to the employee’s material detriment.

In this case, the EAT had to consider the interaction between these two rights, in circumstances where DM had expressly disavowed any intention to bring his employment with LUBL to an end (insisting instead that he should be made redundant).

Decision

Firstly, TUPE is clear, without any caveat, that an objection stops the transfer of employment.

Secondly, in the ordinary course, an objection would lead to the employment terminating on the transfer date, but this would not be treated as a dismissal.  The employment terminates by operation of law.

Thirdly, where the employee objects in circumstances where there is also a substantial change in working conditions to their material detriment, they cannot elect to treat their employment as continuing, but the termination will be treated as a dismissal.

This meant that DM’s employment had terminated on the transfer date and this amounted to a dismissal by LUBL, on the basis of the substantial change in working conditions that transferring to Abellio would have created for DM.
The case was remitted to the employment tribunal to consider the rest of the case, in particular whether DM’s dismissal was fair.

Comment

As is so often the case in TUPE situations, this case highlights the importance of having appropriate warranties and indemnities in sale and purchase, or outsourcing, agreements to cover such eventualities.  Liability for the impact of actual or proposed changes to terms is a matter that is often the subject of negotiation between transferor and transferee, given the interplay between the objection right and material detriment and constructive dismissal claims.

On the facts of the case, there had also been some confusion regarding the employee’s employment status post-transfer.  It remains important that employees are made aware of the impact of objection and that there is clarity about their employment status once the objection right has been exercised.

Case: London United Busways Ltd v De Marchi and another, EAT