In the case of Nottinghamshire Healthcare NHS Trust v Hamshaw and others (19 July 2011) the Employment Appeal Tribunal (EAT) considered whether the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) applied to the transfer of care services from an NHS Trust to a private sector service provider.

In an age where social care and public health policy is focusing more than ever on care in the community, we are seeing a number of changes to care services and an increase in private sector care providers. What is the effect on NHS employers who are currently providing these services but will be transferring them to private care providers?

This recent case demonstrates that it should not be assumed automatically that TUPE will apply.  Because the activities carried out by the new providers were not ‘fundamentally or essentially the same’ as those of the Trust, the EAT decided that the employees had not transferred under TUPE, potentially leaving the Trust with significant liabilities for, amongst other things, redundancy pay and unfair dismissal.

The legal background

TUPE applies to a transfer of a business or undertaking where there is a transfer of an economic entity that retains its identity. It also applies where an organisation is engaging a contractor to do work on its behalf, reassigning such a contract or bringing the work in-house.

From the NHS employer’s perspective, a TUPE transfer means employees assigned to the undertaking automatically transfer to the new care provider, who (with limited exceptions) inherits all rights, liabilities and obligations in relation to them, effectively stepping into the NHS body’s shoes.

Nottinghamshire Healthcare NHS Trust v Hamshaw and others

This recent case concerned a residential care home operated by Nottinghamshire Healthcare NHS Trust which provided 24 hour care to its residents by care workers employed by the Trust.

On 31 March 2010 the care home closed. The residents were re-housed in their own homes and provided with support to develop their confidence and independence. Their care was allocated to two private care providers. The Trust advised the care workers that TUPE applied and that their employment would continue with one of the private care providers. Twelve of the former care workers subsequently brought claims of unfair dismissal, pay in lieu of notice and holiday pay against the Trust and the private care providers.

The Employment Tribunal considered as a preliminary issue whether TUPE applied. The Tribunal found that there was no transfer or service provision change as the changes in the service represented a material shift in the ethos of the service and the manner of provision, as the care provision changed from institution to home and from management to support and, as such, the staff duties and residents’ daily routines were also different. The Trust appealed against this decision.

The EAT agreed with the Tribunal’s decision, finding that the services were fundamentally different to those operated by the Trust; neither the transfer nor service provision change tests were satisfied and so TUPE did not apply.

Impact on NHS employers

NHS employers will need to carefully consider whether TUPE applies when a service they provide is being transferred to a private sector care provider, particularly where the service will be operated differently post-transfer, as will inevitably be the case when services become community based rather than institutionalised.

If NHS employers wrongly believe that TUPE applies to the transfer, in the absence of a well drafted agreement between them and the new service provider, they could face expensive Employment Tribunal claims, such as unfair dismissal and failure to consult claims, from the affected employees.