NHS commissioning activities fall outside TUPE protection, Court of Appeal rules

The Court of Appeal has dismissed an appeal concerning the application of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) to NHS restructuring, clarifying that commissioning healthcare services does not constitute economic activity for transfer protection purposes.

Dr Marcus Bicknell, a GP clinical lead employed by six clinical commissioning groups (CCGs) that merged to form NHS Nottingham and Nottinghamshire Integrated Commissioning Board, brought unfair dismissal claims after being made redundant during the reorganisation. The British Medical Association joined as a claimant, alleging breach of consultation duties.

The Employment Tribunal found that whilst Dr Bicknell had been unfairly dismissed under ordinary employment law, TUPE did not apply because the CCGs were not engaged in economic activity. The Employment Appeal Tribunal upheld this decision, though expressing some doubt about the reasoning.

Lady Justice Elisabeth Laing, delivering the leading judgement, emphasised that the definition of 'economic activity' must be consistent across both competition and employment contexts. The court rejected arguments that TUPE should be interpreted more broadly than EU law required, noting that both regulatory frameworks serve to govern the internal market.

The court examined the European Court of Justice decision in FENIN, a competition case concerning Spanish health service purchasing practices. That case established that purchasing goods or services does not itself constitute economic activity unless the purchaser also supplies those goods or services on a market. The court held that this principle applies equally in the employment context.

The CCGs' principal function was commissioning healthcare services from third-party providers rather than supplying services directly to patients. This distinguished them from entities engaged in economic activity. The court found no legal basis for the proposition that commissioning 'connected to a market' constitutes economic activity simply because third parties eventually provide services in that market.

The appellants argued that TUPE's protective purpose justified a broader interpretation of economic activity, relying on section 38 of the Employment Relations Act 1999, which permits regulations exceeding directive requirements. The court rejected this submission, finding no evidence that the Secretary of State had exercised this power to expand the meaning of economic activity beyond EU law definitions.

Regulation 3(5) of TUPE excludes administrative reorganisations of public administrative functions. The court clarified that economic activity and exercise of public authority are mutually exclusive categories. Where an employment tribunal confidently concludes no economic activity exists, no separate analysis of public authority functions is required—TUPE simply does not apply.

The court also dismissed arguments concerning ancillary activities. The Employment Tribunal had made specific findings rejecting evidence that the CCG provided pharmacy or other services directly, concluding it was 'extremely unlikely' and finding it did not do so.

This decision confirms that NHS commissioning bodies reorganising their structures need not apply TUPE protections, provided they do not directly supply healthcare services to patients. Staff affected by such reorganisations retain ordinary unfair dismissal rights but lose the automatic unfair dismissal protections and transfer of employment terms that TUPE provides.

The judgement reinforces the principle that employment protections in organisational transfers depend on established EU law concepts of economic activity, which cannot be expanded through purposive interpretation alone.