TUPE Transfers: Navigating employee objections and unfair dismissal claims

In the busyness of December, the decision of London United Busways Ltd v De Marchi had the potential to be missed. However, as we move further into 2025, it is worth taking a moment to reflect on the decision and its impact on transactional matters.

 

The case provides useful clarification on the circumstances in which an employee should be considered to have objected to a Transfer of Undertakings (Protection of Employment) (TUPE) transfer in such a way as to preserve their right to claim unfair dismissal against either transferor or transferee.

The legal position

The relevant law is regulation 4 of the TUPE Regulations 2006. Those familiar with TUPE will know that reg 4(7) and 4(8) provide that an employee otherwise caught by a relevant transfer and in scope to automatically transfer can object. If the employee does so, their employment ends at the point that the transfer takes place. The implications of that objection can be that the employee is not considered to have been dismissed and has no right of action against either the outgoing employer (the transferor) or the incoming employer (the transferee).

However, the caveat to that is found in regulation 4(9) and 4(11). These preserve the right of an employee to pursue a claim for unfair dismissal against the employer currently engaging them if the transfer results in a substantial change to their working conditions to their material detriment.

The London Busways case

In the London Busways case, the transfer between London Busways and the new provider of Mr De Marchi’s route, Abellio London Ltd, was going to result in Mr De Marchi having a one-hour journey to work as opposed to his current 15-minute walk. Mr De Marchi took issue with that, however London Busways said that as they considered he was due to transfer, the only way he could stay as an employee of theirs was to accept a change to working conditions. Mr De Marchi also took issue with this. A confusing back and forth of correspondence followed, with Mr De Marchi saying that he did not wish to transfer and that he also did not want to accept the changes to his contract required by London Busways. London Busways held the line that Mr De Marchi’s employment transferred and that it took place on 9 November 2019. Mr De Marchi had commenced a period of sickness absence by this time and Abellio eventually tried to engage with him in February 2020, inviting him to a meeting. He refused to attend and they dismissed him.

He raised a claim and it was appealed to the Employment Appeal Tribunal (EAT). While both the Employment Tribunal (ET) and the EAT reached the same conclusion, specifically that Mr de Marchi could pursue a claim of unfair dismissal against London Busways Ltd, they did so for different reasons.

The EAT stated that where a transfer results in a substantial change in working conditions to an employee’s material detriment, the employee has the right to treat the contract as having been terminated and retain the ability to pursue an unfair dismissal claim against the employer. Depending on the point at which the individual becomes aware of the substantial change and looks to challenge the change, that could be a claim against either the transferor or the transferee. If an employee objects to a transfer in accordance with regulation 7, and does not expressly exercise any right under 4(9) due to a substantial material change, the ability to raise a challenge under regulation 4(9) is preserved and so long as the individual can demonstrative substantial material change to their detriment, will retain a right of action.

Why is this decision significant? 

Despite the restriction on making changes to employee terms and conditions following a relevant transfer, transfers can often result in changes and, in particular, changes to work location. This is a reminder to parties to a transfer that where an employee takes issue with changes, they may preserve their right to raise a claim despite objecting to the transfer or otherwise resigning. If they do not object or resign prior to the transfer, they will move across and can then take issue against the transferee. As part of diligence exercises, it will be important for both transferor and transferee to establish the extent of any change, whether employees are likely to take issue and if so, where that liability could sit. We would then recommend drafting be carefully reviewed with this in mind, to ensure appropriate protections are in place.

What does it mean for those involved in transactions, and particularly, the living sector?

In the context of the living sector, a situation like this may arise where a landlord owns a student rental property and terminates the tenancy of the existing provider to offer to a new provider. The employees of the existing provider would, provided conditions are met, be in scope to transfer. However, if the new provider required employees to work at more than one location, employees may consider this to be a change to their material detriment triggering these provisions. TUPE can be overlooked in real estate transactions however situations like this can occur and have the same impact as they would in any other transaction.

While we do consider that this decision ultimately offers helpful guidance on handling material detriment challenges and objections, transferors in particular should be mindful of what they offer to objecting employees. It may, on the face of it, appear to be to the employee’s benefit to be offered a new role in circumstances where they have objected to transfer. However, as this case demonstrates, there may be unintended consequences associated with doing so, particularly there the transferor is not able to offer the employee the same terms and conditions they had enjoyed previously. As a result, it is one for those involved in transactions to be mindful of.