When a business, or part of it, is sold or taken over, the employees assigned to the transferring part will automatically move to the new employer under the same terms and conditions, with their continuity of service preserved. This is protected by the Transfer of Undertakings (Protection of Employment) Regulations 2006, commonly known as TUPE.
The outgoing employer is required to inform and consult the staff about the transfer and discuss any proposed changes the incoming employer may be making. The question often asked is what happens if the employee refuses to transfer – are they made redundant?
Objecting to the transfer
Under the Regulations, an employee has the right to object to the transfer. If they choose to do so, their employment will normally terminate on the transfer date, but this will not be treated as a redundancy.
However, if an employee objects to the transfer because of a substantial and materially detrimental change to their working conditions, they will be treated as being dismissed by the employer.
A recent Employment Appeal Tribunal case London United Busways Ltd v De Marchi and another [2024] decided ‘the employer’ in this case would be the outgoing employer. Under the current rules, if the employee has 2 years continuous service, this dismissal could give rise to an unfair dismissal claim.
Where TUPE applies, the businesses cannot decide if the staff will transfer. Their employment automatically transfers on their existing terms and conditions with continuity of service preserved.
If employees object to the transfer, their reasons should be carefully reviewed. If the objection is based on a material detriment to their working conditions, there may be a risk of a legal claim.
One way to manage this risk could be to try and obtain indemnities from the incoming employer for deemed dismissals. It would be advisable to take legal advice on any objections raised.
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