Practical Law

PLC Public Sector reports:

If you outsource your public service to the private or third sectors, the former NHS or local authority staff will be protected under TUPE, won’t they? In most cases, yes, but an interesting EAT decision suggests that when the ethos for the new service is different, TUPE may not apply.

This will come as interesting news to NHS trusts and local authorities who are implementing new commissioning plans focussing on re-ablement and independent living. For example, if domiciliary care services re-focus on re-ablement, could that prevent TUPE from applying if there is a change of employer at the same time?

NHS campus closure programme

When the long-term in-patient services for people with learning difficulties closed under the NHS Campus Closure programme, local authorities and PCTs collaborated on new service provision, moving people out of institutional care into supported living or other community placements. At the same time, funding for services for people with learning difficulties moved from the NHS to local authorities. In many cases, the parties ensured that the NHS staff caring for the residents transferred under TUPE to new, private or third sector, care providers. The rationale for these TUPE transfers was that, because the employees were carrying out more or less the same activities both before and after the transfer, TUPE must apply, even though the context in which those activities were being provided had changed. This assumed the transfer was a service provision change, with the client for the service being the PCT and/or the local authority, which in many cases operated pooled budget arrangements for the discharge of their respective functions.

Why no service provision change?

However, in Nottinghamshire Healthcare NHS Trust v Hamshaw and others, the EAT was more interested in the context in which “activities” were provided and not just the activities themselves  Although the fundamental tasks still revolved around personal care, the following differences were evidenced:

• Setting: the individuals had moved to their own accommodation under tenancy agreements with a housing association.
• Provision of care: the staff provided a sleep-in rather than a waking night service.
• Service user activities: the individuals were expected to develop greater independence in cleaning, care and management of their own homes. They could also go shopping and prepare meals with help from the care workers.
• Contractual arrangement: the care providers worked under a framework agreement, with individual placement agreements under which care services could be called off, as and when required.

None of these factors was, in itself, enough to frustrate the TUPE transfer but together led to the EAT finding that the tribunal had been correct to find that the services provided after the changes were “materially different”.  However, one wonders whether, had the facts been slightly different, if TUPE would have applied. For example, what if all the service users had moved into shared accommodation (the judgment is silent on whether their homes were linked in any way)? What if the services provided before the transfer had included some of the activities promoting independent living that became the focus of the new service? What if a single care provider had been appointed, instead of two? Although the tribunal Chairman discounted a claim that the service had been fragmented, that must, in many cases, be a relevant consideration.

Who is the client?

A key issue which was considered by the EAT but not examined in detail was identifying the client for the services. The Tribunal dismissed the idea that the service users themselves were the clients, although perhaps the conclusion would have been different if the service users had been paying for the care support through a direct payment, or through a personal budget administered by the local authority.

Further, in paragraph 26 of the judgment, Counsel for the claimants argued that as the care in question was social care, rather than health care, the client for the services had changed from being the PCT, to which the trust had provided the in-patient services under a contract, to the local authority, which presumably contracted with the care providers, though that point was not made clear.

This tantalising paragraph raises more questions: what if both contracts had been with the PCT? If the responsibility for discharging a function shifts from a PCT to a local authority, has the “client” also changed, for purposes of TUPE, even if that function is delegated back to the original party? Presumably yes, given that section 75 of the National Health Services Act 2006 makes it clear that responsibility for the discharge of NHS and local authority statutory functions remains with the relevant body notwithstanding any delegation.

For more information, see Practice note, Partnerships between local government and NHS bodies.

What does this decision mean for health and social care commissioning?

In light of this decision and given the shift in focus to independent living and re-ablement, it will be interesting to see whether commissioners will start to question the automatic assumption that TUPE will apply. Where local authorities, and eventually GP consortia re-tender services currently provided by the NHS, there are likely to be substantial savings if NHS staff do not transfer to a new, private or third sector, provider which is not obliged to offer its employees access to a final salary scheme and whose employees may also be less qualified and therefore cheaper than the NHS employees.

Indeed it is a concern around high costs and barriers to SME and third sector participation in public service delivery that has lead to a general antipathy in Government towards the application of TUPE to outsourcings from the public sector.  Although the Cabinet Office Statement of Practice on Staff Transfers in the Public Sector, which requires public authorities to apply TUPE principles even if, in strict legal terms, it may not apply, is still valid guidance, the government has embarked on an erosion of protection related to TUPE transfers from the public sector. Most notably, the Fair Deal consultation, now closed, questions the requirement to protect the pension benefits available to employees transferring from the public sector, and the withdrawal of the two Codes of Practice on Workforce Matters have meant public authorities are no longer obliged to ensure their contractors employ new joiners on no less favourable terms than the former public sector employees.

For more information, see our legal updates on the consultation launched on the future of Fair Deal and the Two-tier Code being withdrawn.

If public authorities are more reluctant to find TUPE applies to their transactions, we can expect to see further conflict between those public bodies with commissioning functions and those providing services, as well as the affected employees and their representatives.