London United Busways Limited v V De Marchi & Anor

Where a relevant transfer would involve a substantial change in working conditions to an employee’s material detriment, regulation 4(9) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 gives the employee a choice to treat the contract as terminated. The election must be communicated by an unequivocal overt act inconsistent with the contract’s continuance.

An objection under regulation 4(7) prevents both the contract and associated rights and liabilities transferring to the transferee. If regulation 4(9) applies and the employee objects but does not elect to terminate, regulation 4(8) terminates the contract with the transferor. The employee is treated as dismissed by the transferor and has no remedy against the transferee.

A bus driver’s assigned route transferred to a new operator. The transfer would have required him to work from a different garage, producing a substantial detrimental change in his working conditions. He repeatedly objected to transfer, but did not treat his contract as terminated under regulation 4(9) of the Transfer of Undertakings (Protection of Employment) Regulations 2006.

The London Central Employment Tribunal held that his objection prevented transfer and that he remained employed by the transferor until it dismissed him on the day before transfer. The transferor appealed. The employee cross-appealed against the finding that he had not himself treated the contract as terminated. The central issue was the legal consequence of an objection under regulation 4(7) where regulation 4(9) applies but the employee does not exercise its elective right.

1. Appeal and cross-appeal dismissed. The Tribunal’s finding that the employee had not treated his contract as terminated was not perverse. His repeated requests for redundancy, sickness certificates, requests for sick pay and express statement that he had not resigned supported that finding.

2. Regulation 4(9) confers a right, but imposes no obligation, to treat the contract as terminated where the transfer involves a substantial detrimental change in working conditions. An election requires an unequivocal and unambiguous overt act inconsistent with the contract’s subsistence. It will commonly be an express statement, though not invariably. Its sufficiency and any affirmation are fact-sensitive questions.

3. An employee may exercise that right before or after transfer. If exercised before transfer, the employee is treated as dismissed by the transferor; if after transfer, by the transferee. If the employee neither objects nor elects to terminate, the contract transfers and the employee is not treated as dismissed.

4. However, an objection under regulation 4(7) prevents the statutory transfer of the contract and all connected rights and liabilities to the transferee. Where the objection is made because the transfer would involve the detrimental change addressed by regulation 4(9), the qualifying words in regulation 4(8) mean that its denial of dismissal does not apply. The transfer instead terminates the contract with the transferor, which is treated as having dismissed the employee.

5. The Tribunal was wrong to hold that the employee could remain employed by the transferor after the transfer while retaining the objection. Nevertheless, its ultimate conclusion was correct: the contract did not transfer, the transferor was the only employer against which liability for the dismissal could arise, and the transferee had no liability. The surviving issues were remitted to the Tribunal for determination consistently with this judgment.

• Employment Appeal Tribunal: Appeal and cross-appeal dismissed; the Tribunal’s conclusion that the employee was treated as dismissed by the transferor was upheld on different legal reasoning: [2024] EAT 191.
• London Central Employment Tribunal: Following a preliminary hearing, held that the claimant had been dismissed by the transferor on 8 November 2019. The EAT held that the contract was instead terminated by operation of regulation 4(8), subject to regulation 4(9), with the transferor treated as dismissing him.