Background

TUPE is a complex area and the case below concerns the messy situation of what happens when an employee objects to a transfer, wishing to retain their job with the transferor, and the transfer goes ahead without their express resignation or agreement. Are they to be regarded as dismissed in such a situation and, if so, by whom? While a business transfer or service provision change would otherwise result in the dismissal of an employee, Reg 4 provides for the employment contract to automatically transfer. 

Reg 4(7) gives employees the right to object to a transfer, in which case they shall not be regarded as dismissed (as per Reg 4(8)). Regulation 4(9) provides that where the transfer results in substantial changes to an employee's working conditions to their detriment, they shall be regarded as dismissed by their employer. Regulation 4(7) is stated to be subject to Regulation 4(9) (as well as 4(11), which this decision is not concerned with). The inter-relationship between Regulation 4(7) and Regulation 4(9) has not received much judicial attention.    

Facts

Mr De Marchi (DM) had worked for 18 years as a bus driver for London United Busways Limited (Busways), when Busways lost the contract it had with Transport for London to another route provider, Abellio Limited. This constituted a service provision change to which TUPE 2006 applied. DM was in scope of the transfer but was not happy about the prospect of transferring to Abellio. While the depot from which he started his shift was only a 15 minute walk from his house, if he transferred to Abellio, he would have to travel an hour to start his shift.   

DM told Busways he objected to transferring to Abellio. Busways offered to retain him, on different terms and conditions, which he rejected. He asked instead for a redundancy payment from Busways but this was refused. The parties became entrenched in their positions. Busways maintained that the position was clear-cut: either Mr DM was resigning from Busways or he was transferring to Abellio. DM stated that he was not resigning. Finally, Busways wrote to DM saying that his employment would transfer to Abellio on 9 November. Abellio then sent Mr Morris a 'greeting pack' but he refused to recognise Abellio as his employer. In light of this, Abellio sent him a P45 in December, showing his termination date as 10 November. 

DM brought claims in the employment tribunal arising out of this factual scenario. A preliminary issue was whether DM had been dismissed and, if so, by whom. An employment tribunal (ET) found that DM was dismissed by Busways on 9 November when the transfer took place. An appeal and cross-appeal was made to the EAT on various issues. The EAT had to consider the relationship between the simple right to object, which would be treated as a resignation (reg 4(8)) and the right to treat your employment as terminated by the employer where substantial changes are proposed to the material detriment of the employee (Reg 4(9)). 

The decision

The EAT agreed that the transferor had dismissed DM but found the ET's reasoning flawed. It rejected its binary approach to treating someone either as a Reg 4(8) or a Reg 4(9) case. In the EAT's view, Regulation 4(8) has to be read subject to Regulation 4(9). Not only was this in accordance with the Acquired Rights Directive on which the TUPE Regulations are based, but Regulation 4(8) is expressly stated to be subject to Reg 4(9).

The EAT identified three types of scenario (and, by implication, remedy) where an employee objects to transferring:

• Employee objects to transferring in situation where no substantial changes proposed .
• Employee objects to transferring in situation where substantial changes proposed and elects to treat himself as dismissed.
• Employee objects to transferring where substantial changes proposed and elects not to treat himself as dismissed.

DM fell within the third category and LUB dismissed him when it refused to continue to recognise him as its employee and the transfer went ahead. In those circumstances, the protection afforded by Regulation 4(9) was triggered so he was to be regarded as dismissed by the transferor.   

Comment

While Reg 4(8) provides that someone objecting to a transfer shall not be regarded as dismissed, this must be read subject to Regulation 4((9). Where an employee objects to a transfer and the transfer involves substantial changes to an employee's detriment, if they elect not to treat themselves as dismissed, they will remain employed by the transferor. If the transferor refuses to continue to employ them and the transfer goes ahead, they are deemed to be dismissed by the transferor and any claims will lie against the transferor only. 

It is a complex decision to understand and adds a layer of complexity to what the risks are where someone appears to be objecting. Transferors and transferees are likely to want more information in the due diligence process, about the nature and context of the objection, in order to assess risk and allocate risk between buyer and seller accordingly.