Key takeaways
TUPE does not cover commissioning activities
Commissioning healthcare services is not an economic activity under TUPE.
CCG mergers are not business transfers
Transferring commissioning functions between NHS bodies doesn’t create a TUPE-relevant transfer.
Direct service providers still attract TUPE
TUPE may still apply where NHS bodies directly deliver services.
In Bicknell -v- NHS Nottingham and Nottinghamshire Integrated Commissioning Board the Court of Appeal has held that commissioning health care services is not an economic activity under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) (‘TUPE’).
Legal background
TUPE provides protection for employees when the business or organisation they work for changes ownership, ensuring they retain their employment terms and are protected from detriment as a result of the change in employer. TUPE applies to a “relevant transfer” which includes a transfer of a business or undertaking where there is a transfer of an economic entity that retains its identity, known as a business transfer. However, under TUPE, a relevant transfer specifically excludes the “administrative reorganisation of public administrative authorities or the transfer of administrative functions between public authorities” (under regulation 3(5)).
In the case of Nicholls and another -v- London Borough of Croydon and others the EAT considered the question of whether there was a transfer of an economic entity in relation to the transfer of a primary care trust’s public health team to a local authority. It confirmed that the purchasing or commissioning of goods or services cannot constitute an "economic activity" under TUPE unless the person commissioning the goods or services is also providing those services on the market.
In Nicholls, the EAT relied on the decision in FENIN -v- Commission of the European Communities, a European Court of Justice (‘ECJ’) competition case which determined that that an undertaking is an entity engaged in economic activity, which means offering goods and services on a given market.
Factual background
Dr Bicknell, was a GP clinical lead employed by the Nottingham City Clinical Commissioning Group (‘NC CCG’). CCGs were statutory NHS bodies responsible for planning and commissioning healthcare services for particular geographical regions. They assessed local health needs, set priorities and purchased services (such as hospital care, community services and emergency care) for people from providers.
Following a merger in 2020 of six CCGs in the region, including NC CCG, into North Nottingham CCG (‘NN CCG’), Dr Bicknell was made redundant. He subsequently pursued an unfair dismissal and breach of contract claim against NN CCG. Dr Bicknell claimed that TUPE applied as the merger gave rise to a business transfer under the regulations.
The tribunal found that there was no transfer of an economic entity for the purposes of regulation 3(1)(a) TUPE and the claims were dismissed. In applying Nicholls, the tribunal found that NC CCG’s principal work was to commission healthcare services from providers to be delivered by those providers to the public therefore it did not carry out an economic activity within the meaning in TUPE. Therefore, when NC CCG’s functions were transferred to NN CCG as part of the merger, there was no transfer of an economic entity for the purposes of regulation 3(1)(a).
Dr Bicknell appealed to the EAT. The EAT found that the tribunal had correctly applied Nicholls but cast some doubt as to whether the judge in that case should have applied the principles established in FENIN (an ECJ competition case) in an employment context. In any event, the EAT did not consider that Nicholls’ interpretation of FENIN was manifestly wrong. Dr Bicknell appealed to the Court of Appeal.
The Court of Appeal decision
Dr Bicknell argued that Nicholls was wrongly decided and that FENIN should not apply to employment cases as it is a competition case. The Court of Appeal dismissed the appeal.
The Court rejected Dr Bicknell’s assertion that a court or tribunal should take a different approach to deciding whether an entity is engaged in economic activity depending on whether they are dealing with an employment or competition dispute. The Court determined that the approach taken in Nicholls was correct and that courts and tribunals can apply the ECJ’s reasoning in competition cases to employment cases when determining the meaning of “economic activity.”
Comment
This judgment is relevant to NHS bodies who commission services within healthcare but do not directly provide them. The Court’s decision suggests that simply moving commissioning responsibility or restructuring services within the NHS will not, by itself, amount to a relevant transfer under TUPE and that employees of commissioning bodies that purchase services rather than provide them directly are excluded from TUPE protection.
However, for NHS bodies who are involved in direct service provision, it is likely TUPE will apply to transfers of services between providers. Even when TUPE may not apply, employers should engage in full consultations with employees and follow a fair and transparent process during organisational change. In addition, public sector bodies should consider the operation of The Cabinet Office Statement of Practice (COSOP) which provides TUPE-like protection for staff when functions are transferred within the public sector, particularly when TUPE does not apply.
