What happens when employees say no under TUPE?

TUPE situations can be complicated and involved. Not to mention stressful and uncertain for everyone they affect.

But what happens when an employee, after consultation, flatly refuses to accept the transfer to a new employer? If there is no acceptable alternative work available, who is responsible for dismissing them, or for their redundancy?

The recent Employment Appeal Tribunal (EAT) decision in London United Busways Ltd v De Marchi and another [2024] EAT 191 considered these questions carefully. And, the decision provides crucial insights into the implications of an employee objecting to such a transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). Employers facing similar scenarios must be aware of the legal framework and practical steps they can take to manage risks effectively.

Key Facts of the Case

In this case, the Claimant, Mr DM, was a bus driver employed by London United Busways Limited (LUB). As a result of a re-tendering exercise, his bus route was transferred to Abellio London Limited (AL). While all drivers assigned to the route were due to transfer to AL under TUPE, Mr DM objected, citing a substantial change in working conditions—namely, a much longer commute to a new depot.

He requested redundancy, which his old employers, LUB, refused, and he declined an alternative contract offered by LUB. LUB then confirmed that Mr DM’s employment would terminate on the transfer date due to his objection, treating it as a resignation. However, Mr DM maintained that he had not resigned.

The new employers, AL, later assumed responsibility for his employment, but ultimately terminated it when he failed to work or respond to correspondence. This led to Mr DM bringing claims against both LUB and AL, with the Tribunal ruling that he had in fact been dismissed by LUB prior to the transfer.

EAT Decision and Key Legal Principles

The EAT upheld the Tribunal’s decision, confirming that LUB was responsible for the dismissal. The key takeaways from the ruling include:

1.    Employee Rights in TUPE Transfers – If a TUPE transfer leads to a substantial change in working conditions that materially disadvantages an employee, they may choose to treat their contract as terminated, though they are not obliged to do so.

2.    Timing of Termination Matters – If an employee elects to terminate their contract before the transfer, the original employer (transferor) is responsible for the dismissal. If they do so after the transfer, the new employer (transferee) is liable.

3.    Effect of Objection to Transfer – When an employee objects to the transfer, and the change in working conditions is materially detrimental, their contract is deemed terminated prior to the transfer, meaning their employer at the time (transferor) is responsible for any dismissal claims.

4.    Employer Liability – In cases where an employee objects to the transfer due to material detriment, the transferor may be left defending claims, rather than the transferee.

Practical Considerations for Employers

1.       Managing Employee Objections

Employers must be aware that the method of an employee’s objection is not legally defined. Certainly, a clear written statement expressing refusal to transfer is more than sufficient. Employers should ensure proper documentation of any correspondence with employees regarding the transfer to avoid ambiguity.

 2.       Identifying and Addressing Material Detriment

If an employee raises concerns about substantial changes in their working conditions, employers should assess whether these changes constitute a material detriment. If they do, there may be a higher risk of the transferor facing dismissal claims. Offering suitable alternative employment may help to mitigate these risks, if work is available, but it is up to the employee to decide if the alternative is, indeed, a suitable alternative to being made redundant.

3.       Ensuring Commercial Protection in Transfer Agreements

TUPE transfers can lead to disputes over liability for employment claims. It is critical for both the transferor and transferee to include indemnities in commercial agreements specifying who will bear the costs of potential employment claims arising from the transfer. Negotiating these terms upfront can prevent costly legal battles later.

4.       Handling Redundancy Requests

When an employee requests redundancy instead of transferring, employers must carefully consider their response. Automatically rejecting such requests without considering whether the change amounts to a redundancy situation could lead to claims of unfair dismissal. Employers should assess the business case for redundancy, and the feasibility of offering redundancy payments in cases where TUPE-related changes significantly affect employees.

Conclusion

This EAT ruling underscores the complexity of TUPE regulations, and the importance of understanding the implications when employees object to a transfer. Employers must take proactive steps to document employee objections, assess material detriment claims, and ensure commercial agreements include appropriate liability protections. By managing TUPE transfers strategically, businesses can mitigate legal risks and ensure compliance with employment law.

TUPE legislation is highly technical and always requires getting professional employment advice, in addition to proper legal advice about the actual commercial negotiations involved with TUPE situations. TUPE is definitely not a DIY job.

The guidance provided in this article is just that - guidance. Before taking any action, make sure that you know what you are doing, or call an expert for specific advice