The Employment Appeal Tribunal (EAT) has held in Nicholls and ors v London Borough of Croydon that if a public health commission team was an “economic entity” under the Transfer of Undertakings (Protection of Employment) Regulations 2006, the tribunal needed to explain why it did not constitute a relevant transfer under the regulations.

Basic facts

In April 2013, 14 members of a public health care team engaged in purchasing or commissioning health services for Croydon Primary Care Trust were transferred over to the London Borough of Croydon under The Health and Social Care Act 2012 (Croydon Primary Care Trust) Staff Transfer Scheme 2013.

In 2015 the Council announced that it wanted to change the claimants’ terms and conditions of employment and initially asked them to agree to vary them.  They refused, after which four of them resigned and claimed that they had been constructively dismissed. The Council dismissed the remaining ten claimants in August 2015, but offered to re-engage them on new terms.  Six accepted re-engagement, but four did not.

They all brought claims for automatically unfair dismissal under TUPE as opposed to the Staff Transfer Scheme because it contained a time limit which had already been exceeded.  The Council accepted that there had been a transfer, but argued that it was excluded from the TUPE regulations by regulation 3(5).

Relevant law

Regulation 3(1) of TUPE states that the regulations only apply to “a transfer of an economic entity which retains its identity”.

Regulation 3(2) states that “economic entity” means “an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary”.

Regulation 3(5) states that “an administrative reorganisation of public administrative authorities or the transfer of administrative functions between public administrative authorities is not a relevant transfer”.

Regulation 4(1) states that a “relevant transfer” does not terminate a contract of employment that “would otherwise be terminated”. In other words, TUPE ensures that relevant contracts of employment are protected. 

Regulation 4(4) states that any variation of a contract is void if it is connected to the transfer. 

Tribunal decision

The tribunal decided that there was no relevant transfer because the case fell within regulation 3(5) and therefore TUPE did not apply. It also found, however, that “all or almost of the work done by the Public Health Team can be, and in fact is, offered by non-state actors operating in the same market”.

Secondly, it held that the reference to a “relevant transfer” in regulation 4 of TUPE did not cover circumstances such as these where the contracts of the employees were already protected under the Health and Social Care Act 2012.  As such, they could not have taken advantage of regulation 4(4), even if there had been a TUPE transfer.

EAT decision

Noting that this was not an “easy or clear-cut case”, the EAT allowed the appeal on the basis that, as the tribunal had made a finding that the public health team was effectively carrying on an economic activity, it needed to explain why it had concluded that regulation 3(5) applied.

The tribunal was also wrong to conclude that, if there was a relevant transfer, the claimants’ employment could not have transferred under regulation 4(1) which meant they could not rely on regulation 4(4). The TUPE regulations had to give effect to the Acquired Rights Directive which did not contain the limitation equivalent to the words “which would otherwise be terminated by the transfer” in regulation 4(1).

The EAT therefore remitted the case to another tribunal to reconsider these points.