Clear direction on employee transfers

Employee transfers need a clearer direction. Picture: PA
Employee transfers need a clearer direction. Picture: PA
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Substantial change must be proved, says John Lee

A RECENT judgment of the Employment Appeal Tribunal (EAT) in London has given welcome clarity for employers involved in the transfer of employees between businesses. Cetinsoy & Others v London United Busways Limited involved a group of bus drivers employed by CentreWest, a London company based at Westbourne Park. When their bus route was transferred to London United, the drivers were informed that their place of work would be moved to Stamford Brook, a relocation of around 3.5 miles distance. An employment tribunal had held that the change involved a greater travelling requirement of 30-60 minutes per day for each of the employees.

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (the so-called “TUPE” Regulations) protect employment rights in connection with the acquisition or disposal of business and in “contracting” situations involving the provision of services. In addition to preserving employment rights in business or service contract transfers and rendering dismissals because of them unfair, they provide for employees being entitled to consider themselves dismissed where changes imposed by the incoming employer either amount to a “fundamental” breach of an employee’s contract of employment or a “substantial” change in working conditions to their “material detriment”.

The regulations have been the source of some controversy recently, as a prime target of the coalition’s “red tape challenge” which aims at deregulating business, particularly in situations where our domestic legislation has “gold plated” European Directives. Following vaunted proposals at overhauling what is a key piece of legislation governing many commercial transactions, reforms were introduced in January. Theresponse was generally lukewarm, having fallen well short of their initial proposals although employers’ as well as employees’ representatives applauded the government’s decision not to pursue these fully. Whilst some reforms sought to make it simpler for employers to effect dismissals or to vary contracts in these circumstances, doubts exist over just how much commercial reality will in the end reflect intention. The reforms leave a degree of uncertainty as a result.

The EAT in Cetinsoy was asked to consider whether the change in location amounted to a “fundamental” breach of contract to or “substantial” change in the bus drivers’ working conditions. It upheld an employment tribunal’s earlier findings that neither of these criteria had been met. Importantly, the context in which the London bus drivers were asked to change location was highlighted by the EAT. Against this background, a change of location of only three and a half miles was not considered sufficient to support the drivers’ cases.

Justice Langstaff, delivering the judgment of the EAT said: “The question whether a transfer involves…a substantial change in working conditions is not asking about contractual terms…it is asking about a change in the way in which, or the environment in which, people work when comparing the position after the transfer of undertaking with that before…in the circumstances of this case, ‘substantial change’ and ‘fundamental breach’ go together…”

Although cases of this nature will always be decided on their own particular facts, the EAT’s judgment upholding the tribunal’s decision has provided further certainty in this area and is likely to be pointed to in future cases. The decision highlights the fairly high threshold that must be met in order for employees to prove such changes amount to either fundamental breaches of contract or substantial changes in their working conditions. In this case, the tribunals pointed to the apparent disparity between the changes involved when balanced against the far more severe loss of employment.

On one view, the judgment serves as a reminder to employees of the approach that could be taken by tribunals and on the other, successful tenderers or purchasers of businesses will take solace in the knowledge that there is arguably less chance of them facing successful claims and employment liabilities in these situations. • John Lee is an associate and solicitor advocate with DWF LLP www.dwf.co.uk

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