Monthly Highlights – UK Employment Law – December 2024

In the final instalment of 2024, our team summarises the latest UK case law and developments in employment law – and their implications for employers.

1. Failure to follow the Fire and Rehire Code of Practice may lead to a 25% compensation uplift for protective awards made from 20 January 2025.

• Protective awards of up to 90 days gross uncapped pay may be ordered by the Employment Tribunal when an employer fails to meet collective consultation requirements in redundancy situations involving 20 or more employees.
• When the Code of Practice on Dismissal and Re-engagement took effect in July 2024, it omitted protective awards from the list of claims eligible for compensation uplifts.
• The Trade Union and Labour Relations (Consolidation) Act 1992 (Amendment of Schedule A2) Order 2024 addressed this situation. It added failure to follow collective consultation requirements under s189 to the list of claims eligible for up to a 25% compensation uplift for non-compliance with a relevant code of practice.
• When assessing the maximum potential financial liability for failing to comply with collective consultation obligations in a redundancy situation, employers can no longer rely on 90 days’ gross pay per employee as a worst-case scenario. An employer must now also consider whether the statutory code of practice on dismissal and re-engagement has been breached. If it has, the employer can add up to 25% to estimated worst-case scenario figures.

2. In London United Busways Ltd v De Marchi and Anor, the Employment Appeal Tribunal upheld the Employment Tribunal’s decision that an employee was dismissed by the transferor after repeatedly objecting to a transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). He did not resign from the transferor (LUB Ltd) and did not transfer to the transferee (AL Ltd) after signing new terms of employment with AL Ltd. The Employment Appeals Tribunal reached the same conclusion as the Employment Tribunal, albeit through a different analysis of the operative provisions of TUPE.

Facts

• The claimant, a bus driver for LUB Ltd, objected to being transferred to AL Ltd under TUPE. The claimant sought redundancy when the contract for operating his bus route was retendered due to the material changes to his terms this would entail. AL Ltd operated out of a garage over an hour away from the claimant’s home and the claimant did not own a car, whereas LUB Ltd’s operating garage was a 15-minute walk.
• LUB Ltd proposed alternative employment but did not wish to offer redundancy. The claimant refused to resign from LUB Ltd and signed a new contract with AL Ltd. The claimant repeatedly objected to the TUPE transfer due to the material change of terms and conditions a transfer would entail.
• The claimant later brought TUPE claims that depended on establishing how his employment was terminated. The claimant asserted that his employment with LUB Ltd continued. LUB Ltd asserted that his employment ended on the transfer date.

TUPE Regulations

• Regulation 4(1) provides that, except where an objection is made under Regulation 4(7), a relevant transfer operates to transfer affected employees’ contracts from the transferor to the transferee.
• Regulation 4(7) gives an employee the right to object to a transfer.
• Regulation 4(8) provides that, subject to Regulation 4(9) and (11), where an employee objects, the relevant transfer terminates the contract without the employee being treated as dismissed for any purpose.
• Regulation 4(9) addresses a scenario where a transfer involves or would involve a substantial change in working conditions to the material detriment of an affected employee. In that case, the employee may treat the contract of employment as having been terminated, and the employee shall be treated for any purpose as having been dismissed by the employer.
• Regulation 4(11) preserves the employee’s entitlement to resign and claim constructive dismissal under common law.

Employment Tribunal Decision

• The Employment Tribunal determined that the claimant’s employment did not transfer from LUB Ltd to AL Ltd by way of his objection under Regulation 4(7), which set into motion the mechanism of Regulation 4(8) and (9). As a result, the claimant continued to be employed by LUB Ltd until either his dismissal or his decision to treat the employment contract as terminated under Regulation 4(9).
• LUB Ltd’s actions constituted a dismissal prior to the TUPE transfer from LUB Ltd to Al Ltd.

Employment Appeal Tribunal Decision

• The TUPE transfer resulted in the termination of the claimant’s employment with LUB Ltd due to his objection to the transfer, which was based on a significant change in working conditions to his material detriment.
• The Employment Appeals Tribunal held that the Employment Tribunal’s conclusion, failed to have regard to the position and that Regulation 4(8) is expressly subject to (9) and (10).
• The Employment Appeals Tribunal considered cases where a relevant transfer involves or would involve a substantial change in working conditions to the material detriment of an employee whose contract is, or would be, transferred. In those cases, the Employment Appeals Tribunal decided that Regulation 4(9) TUPE allows, but does not require, the employee to treat the contract as having been terminated.
• If the employee exercises that right under Regulation 4(9), the employee will be considered as having been dismissed by the employer. (The employer may be the transferor or the transferee, depending on whether the effective date of termination is before or after the relevant transfer.) If the employee does not exercise that right, the employee will transfer to the employment of the transferee, unless they have objected to the transfer under Regulation 4(7). Where the employee objects to becoming employed by the transferee under Regulation 4(7) in circumstances where Regulation 4(9) applies, the effect is to preclude the transfer of the employee’s employment contract to the transferee. In those circumstances, notwithstanding the employee’s election not to terminate the employment contract under Regulation 4(9), Regulation 4(8) operates as to terminate the employee’s employment contract with the transferor. As a result, the transferor is the entity seen to have dismissed the employee – and the organisation responsible for possible remedies.

Key Takeaways

• Transferors should note that an employment contract does not transfer in cases where an employee objects to a TUPE transfer under Regulation 4(7) and elects not to terminate the employment contract under Regulation 4(9).
• Regulation 4(8) terminates the employment contract with the transferor, who is treated as having dismissed the employee and is solely liable for any claims the employee may bring.
• As such, transferors in this scenario, should consider seeking indemnity protection for such Regulation 4(9) dismissals from the transferee.