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12 November 2018

128: Can TUPE apply to the transfer of public health functions?

In Nicholls v London Borough of Croydon, the Employment Appeal Tribunal (the EAT) had to consider whether the transfer of a Primary Care Trust’s public health team to a local authority was a transfer of an economic entity covered by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), or whether it fell within the public administrative authorities exception.

TUPE applies where there is a transfer of an economic entity that retains its identity. TUPE may apply to staff who are carrying out economic activities within a public administration. However, TUPE specifically excludes from its scope a reorganisation of public administrative authorities or a transfer of functions between public administrative authorities (Regulation 3(5)). Cases dealing with the distinction between economic activities and the exercise of public functions are rare, mainly because many transfers arising out of public sector reorganisations are covered by statutory staff transfer schemes or the Cabinet Office Statement of Practice on Staff Transfers in the Public Sector.

The claimants in this case were employed in the public health team of Croydon Primary Care Trust. Their work mainly involved commissioning third parties to provide health advice to the public, as well as research, training and maintaining the public health library. In 2013 the team was transferred to the London Borough of Croydon under a statutory staff transfer scheme. To a large extent, this scheme mirrored TUPE in providing protection for transferring employees. However, unlike TUPE, it placed a two year time limit on the right to claim automatic unfair dismissal. The claimants were dismissed when they refused to agree to new terms and conditions. Since they were time-barred under the statutory scheme, they brought unfair dismissal claims under TUPE, arguing that there had been a transfer of an economic entity.

The Employment Tribunal found that most of the team’s work could be carried out by private sector organisations operating in the same market, which was a strong indicator of economic activity. However, it went on to conclude that the employees’ activities in improving public health involved the exercise of public authority rather than an economic activity, meaning that TUPE did not apply to the transfer. On appeal, the EAT ruled that the Tribunal had not adequately explained how it concluded that the employees were exercising public administrative functions whilst also finding that private companies were involved in similar work. The case was remitted to a fresh Tribunal for reconsideration of this issue.

Whilst we await the Employment Tribunal’s further decision in this case, the EAT’s judgment provides a useful detailed review of case law in this area and identifies key questions for determining whether an entity is involved in exercising public powers or carrying on an economic activity. For example, if there is a market for the relevant goods and services, providing those goods and services is likely to be an economic activity even if they are provided free of charge. It is also relevant to consider whether the activity is capable of being carried out, at least in principle, by a private undertaking with a view to profit.

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