Staff Transfers

August 29th, 2018

In Nicholls v Croydon LBC and Hacker v Croydon LBC, UKEAT/0033 and 0004/18/RN, the employment of the Claimants (BMA Appellants and Unite Appellants) transferred on 1 April 2013 from the Croydon Primary Care Trust (“the Trust”) to the London Borough of Croydon (“the Council”).  In connection with the transfer, the Secretary of State made the Health and Social Care Act 2012 (Croydon Primary Care Trust) Staff Transfer Scheme 2013 (“the Staff Transfer Scheme”).  He did so in exercise of the powers conferred by Section 300 of the Health and Social Care Act 2012. 

The Claimants remained with the Council for over two years.  In 2015 the Council wanted to change the Claimants’ terms and conditions of employment.  Initially, it invited the Claimants to agree to vary their terms and conditions.  This offer was not accepted by any of the Claimants.  Four of the Claimants resigned and claimed that they had been constructively dismissed.  Then in August 2015 the Council dismissed the remaining ten Claimants and offered to re-engage them on new terms.  Six of the Claimants accepted re-engagement.  Four did not.  The Claimants have brought claims for unfair dismissal.

The preliminary issues were:

(1)   Whether there was a “relevant transfer” for the purposes of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”); and

(2)    If there was a relevant transfer, whether each of the Claimants’ employment with the Trust was transferred pursuant to the operation of Regulation 4 of TUPE.

The Employment Tribunal (“the ET”) answered “No” to each of these questions.

The Council accepted that there had been a transfer, and that the transferred entity retained its identity, but contended that what happened on 1 April 2013 was not a “relevant transfer” because what was transferred was not an “undertaking” or “economic entity”, and that this was a case to which Regulation 3(5) of TUPE applied, i.e. it was an administrative reorganisation of public administrative authorities or the transfer of administrative functions between public administrative authorities, as referred to in Article 1(1)(c) of the Acquired Rights Directive and the decision of the ECJ in Henke.

The ET decided that there was no relevant transfer for the purposes of TUPE because the case fell within Regulation 3(5).  The EAT concluded that the ET had rightly rejected arguments that: (a) the transferred public health team’s activity of purchasing or commissioning health services was in itself an “economic activity” for the purposes of Regulation 3(2); and (b) Regulation 3(5), if otherwise applicable, did not apply because the transferring entity, a Primary Care Trust, carried on some economic activities.

However, the ET found that all, or almost all, of the work done by the public health team could be, and in fact was, offered by non-State actors operating in the same market.  That was a strong indication that the public health team was carrying on an economic activity. Having made that finding, the ET said the EAT either failed to give adequate reasons for its conclusion or was wrong, if and insofar it concluded that it was a sufficient reason for reaching that conclusion that the public health team did not bid for contracts and was not trying to obtain business. The ET was also wrong to conclude that, if there was a relevant transfer, the Claimants’ employment was not transferred pursuant to Regulation 4(1) of TUPE and they were not entitled to rely on Regulation 4(4), that invalidates variations the sole or principal reason for which is a TUPE transfer or a Staff Transfer Scheme which gives employees rights which are equivalent to those conferred by Regulation 4 of TUPE.

An “economic activity” is any activity consisting in offering goods and services on a given market.  It is relevant for these purposes to consider whether the activity consists in the provision of goods and services and whether there is a market for the relevant goods or services.  If there is such a market, the provision of goods and services on that market is an economic activity, even if the goods or services in question are provided free of charge and/or without a view to making a profit.  What is relevant is whether the activity is capable of being carried on, at least in principle, by a private undertaking with a view to profit. There can be such a market even if the goods or services are being provided to the State or a State-authorised entity, or the goods or services are being provided by one State body to another (as for example a State-run service for cleaning and maintaining State schools).

Given the definition of “economic activity”, an entity whose activities fulfil this definition will be an undertaking even if it is a public law entity, it is publicly funded, it acts in the public interests, and it acts pursuant to statutory functions. The central concept is that what is called “exercising public powers” is not an economic activity. The task in any particular case is to determine whether a particular activity does, or does not, constitute the exercise of public authority, which may be a difficult task.

One thing is clear: “the exercise of public authority” does not include everything which a public authority does.  There is no single definitive test. It is relevant to ask whether the activity is necessarily carried out by public entities or is an essential function of the State; whether the activity is a core State activity; whether the activity has always been carried out by public entities; whether the activity involves the exercise of “prerogatives outside the general law” or “privileges of official power”; whether the activity involves the exercise of rights and powers of coercion; whether the activity is a public service to which any idea of commercial exploitation with a view to profit is alien or one which “cannot conceivably be carried out within a competitive system; whether the activity has an exclusively social function; whether the activity is typically that of a public authority; whether the activity is carried out in the public interest or is a service provided for the benefit of the whole community or intended to safeguard the general interests of the State or other public bodies; and whether the activity involves providing services in competition with those offered by operators pursuing a profit motive. The importance of these relevant considerations may vary from case to case. None of them is a definitive statement of the necessary and sufficient conditions for finding that an activity involves the exercise of public authority.

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