The In-House Lawyer

One thing is for sure – the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) 2006 is here to stay. Recently, there have been some interesting developments in this area that may challenge our current assumptions on best practice for transfers under TUPE.

In the current economic climate, the public sector is under increasing pressure to make cost savings. It is estimated that over the next few years, savings of up to £6bn will have to be made by the government. It is inevitable that this quest for savings will result in some services and provisions being transferred to the private sector. In light of this, TUPE will become increasingly important. TUPE can bring many challenges for employers and none more so than when employees are transferring from the public sector.

In this article we discuss recent developments and key questions that are being asked about the operation of TUPE.

Have we assumed TUPE will apply in too many situations?

TUPE will be relevant when there is:

1. a transfer of an economic entity that retains its identity (standard transfer); or
2. a service provision change (service provision transfer).

The Employment Appeal Tribunal (EAT) in Metropolitan Resources Ltd v (1) Churchill Dulwich Ltd in liquidation (2) Cambridge & ors [2009] confirmed that the activities that are transferring need not be identical. It will be sufficient if they are ‘fundamentally or essentially the same as those carried out by the transferor’. As a result of this decision many of us have advised that TUPE will apply when the activities are similar in nature, therefore erring on the side of caution in deciding that a TUPE situation exists.

However, the recent case of Nottinghamshire Healthcare NHS Trust v Hamshaw & ors [2011] (below) provides us with a decision that may make us advise our clients differently in the future in relation to whether TUPE applies.

Nottinghamshire Healthcare NHS Trust v Hamshaw & ors

Facts

This case concerned 12 care workers who were employed by Nottinghamshire Healthcare NHS Trust to support vulnerable adults at a residential care home. The workers provided 24-hour care to the vulnerable adults at the care home. The care home was subsequently closed and the residents were rehoused into their own homes. Going forward the care was to be provided by two private care providers (Perthyn and Choice Support) instead of the NHS Trust.

The NHS Trust informed the workers that they would be transferred under TUPE and that their employment would continue with Perthyn and Choice Support who would be carrying out the service. The new providers disputed the applicability of TUPE and claims for unfair dismissal (among other things) were pursued.

Decision

The EAT found against TUPE applying on the facts of this case.

In relation to the standard transfer, the EAT found that the economic entity was in fact Hillside House, its premises, staff, residents, equipment, resources and organisation. It was agreed between the parties that there had been a transfer of the care assistants (but not care workers) and the residents but not of anything else. The EAT found that the original entity was residential based whereas the new provision was focused on personalised support for each individual within their home setting. This difference marked a shift in the identity of the entity. It was also held that the activities carried out by Perthyn and Choice Support were not ‘fundamentally or essentially the same’ as those carried out by the NHS Trust.

In relation to the service provision transfer, the EAT concluded that because the activites carried out by Perthyn and Choice Support were not ‘fundamentally or essentially the same’ this test was not satisfied.

Therefore, TUPE did not apply in this situation and the new provider did not have to employ the original care workers to carry out the support provision.

Comment

This case reinforces previous thinking that there is an implicit requirement that the post-transfer activities must be identifiable as the pre-transfer activities for a service provision change to occur. This case has direct relevance for those in the social care sector and could be significant as local authorities move more towards individualising support for vulnerable adults. This case could in specific circumstances mean that private providers do not take on the liabilities of the NHS staff including their higher salaries, gold-plated pension provision and enhanced sickness benefits that these employees often bring.

The case can also be relevant in cases involving the use of personal budgets under the emerging concept of personalisation, which encourages vulnerable adults to have greater independence and a choice in who supports them to carry out tasks. If the vulnerable adult uses their personalised budget to directly employ a worker to support them, TUPE is unlikely to apply.

Despite this case opening the debate on TUPE transfers, it should not be seen as opening the floodgates for new providers to argue that the way in which they intend to carry out the contract in the future should mean that TUPE will not apply in the given situation. Only in situations in which the ‘new’ service is genuinely different from the ‘original’ service will the provider have an arguable case for claiming that TUPE will not apply. However, this case does appear to suggest that the focus of the tribunals is more on the differences in the services rather than the broad similarities.

This case poses an interesting proposition that the tribunals are beginning to realise the difficulties that TUPE can sometimes put employers under and therefore will future UK decisions be more in line with those found on the continent?

By Mini Setty, associate, and Joanne Frew, partner, DWF LLP.

E-mail: mini.setty@dwf.co.uk; joanne.frew@dwf.co.uk.