TUPE

Site visitors will know that TUPE and the European Acquired Rights Directive from whence it came, constituted a framework for protecting employees in the event that the undertaking in which they work is transferred. The principle covers transfers of contracts as well as entire businesses, because TUPE extends to undertakings, businesses and parts of businesses.

 

The history of TUPE’s application has ebbed and flowed. Early on, caselaw established that the transfer of goodwill was all important when an alleged TUPE transfer might have been a closure and a re-start, thus suggesting that what had occurred had not been a transfer. In such cases one needs to consider whether what rises from the ashes is substantially the same as what went before. Then the Sophie Redmond case, although not a UK case, made it clear that TUPE would apply to ‘Contracting Out’ by local government, even though the service ceased in-house.

For a while the safest assumption was that TUPE applied in all situations; then the Suzen case changed all that and things went from the sublime to the ridiculous. After Suzen it looked for a while as if it might be arguable that a transferee of an undertaking (ie domiciliary care for a particular client group) in a labour intensive business (ie where there was not much else to the undertaking other than labour) could avoid TUPE simply by deciding not to take on any of the employees of the transferor. Whilst it is now clear that if the transferee takes on the majority of employees this is a factor in favour of there being a transfer, it is not clear how far the courts will look at the conduct of a transferee who does not take on any staff, in deciding whether a transfer took place. The recruitment crisis is at such a pitch in social care that it is hard to envisage a situation where the employees will not in fact be needed!

 

Recent case law has re-asserted that the essence of the test for a transfer is still whether there is a new employer responsible for operating something identifiable as an autonomous economic entity – that is a TUPE transfer.

 

The UK took advantage of the Presidency of the EU to update and improve the amendment to the original Directive underlying our own TUPE regulations. The amendments implemented member states to provide for the transfer of pension rights, and in the public sector that has been translated into guidance that broadly comparable rights should be given. Amendments to our own regulations are expected by the end of 2003. The December 1999 Regulations also allowed for employees of organisations providing services or assets to local authorities to join the local government pension scheme.

 

In 2003 the Cabinet Office produced instructions which it believes to apply to local government through the means to give directions with regard to Best Value and Procurement policies, whereby LAs must require bidders to not only assume that TUPE will apply, plus provide broadly comparable pension entitlement to the Local Government Pension Scheme arrangements to transferring and new recruits, BUT ALSO to promise not to employ new recruits (seemingly without limit as to time) on terms less favourable than the transferees were obliged to offer to the transferring employees. At the same time, however, the Government seems to think that the Retention of Employment Model, whereby NHS support staff remain within the public service, and are merely seconded to the private contractor in a PPP or similar scheme, avoiding TUPE, is necessary and appropriate for the implementation of government policy about getting the private sector involved in Health Care. It remains to be seen whether someone will argue that TUPE did apply and that the transferring NHS body had no discretion to regard the employee’s employment as continuing in the NHS. . ..

 

Certainly it is the government’s intention that the application of TUPE will become the general rule. It does look as if the tide is now heading back in favour of TUPE application, if there is such a thing as a trend. But for now we have to struggle with competing lines of precedent in the courts.

 

One needs to ask, how do the TUPE principles work in the context of the mixed means of commissioning, given that no one entity will be operating the whole of the authority’s residential care function, or the domiciliary care function of a local authority? Should we be looking at separate aspects of those services, for instance – by client group, such as ‘older persons’, ‘learning disabilities’, ‘drug and alcohol’ clients, or by addresses (eg of specific care homes or districts) or service types such as ‘shopping’, ‘bathing’, ‘cleaning’, ‘intimate personal care’ etc?

 

The most topical question in an era of personalisation, let alone mass de-commissioning and service provision change, is the impact for Direct Payments for Adult Social Care of the TUPE Regulations

People are naturally worried about the impact on choice and control, in the context of individuals, changing their arrangements for care and support.

TUPE thoughts

Basically, where the purchaser used to be the council, and the purchaser is now the original service user, through a genuine Direct Payment – that is probably not a traditional TUPE transfer or a service provision change, so the staff do not transfer to the new provider – i.e. the service user or an agency chosen by him/her. The word ‘genuine’, is important, because of the Daynes case – more on this, soon.

Where the council was, and still is the purchaser, and it’s just the provider who is different; or where the service user was the purchaser, and now the agency chosen by that same client purchaser, is different, it is at least possible if not probable that TUPE applies – the service provision change sort of transfer as well as old style ‘undertaking’.

Since this sort of work is labour intensive, not asset reliant, whether there is an intention to transfer the employees or not assumes a greater significance than it otherwise might. The risk might be particularly clear in a Slivers of Time sort of a set-up where there will be a close link between the original agency worker and the client, instead of the client just having to make do with whoever is allocated by the agency.

The meaning of ‘undertaking’ may be relevant: the regulations apply to public and private undertakings engaged in economic activities, whether or not they are operating for gain – it could be said that a person buying services to meet their own needs was not an undertaking engaged in an economic activity, because there is no business purpose, perhaps. This may be why there are no cases about TUPE regs forcing an individual to take on a previous provider’s staff.

TUPE worries in the context of direct payments

  • Supposing the service user has a direct payment and has an employee. And then the service user gives up the DP. The Council re-provides, either by direct in-house provision or through a contracted agency. What happens to the service user’s old employee? No SPC is a possible outcome, because the identity of the purchaser is now different and what is being done is the discharge of a statutory function. But it is possible that an old style transfer might arise
  • Supposing the service user qualifies for NHS Continuing Health Care – does the employee under a previous DP arrangement, have the right to transfer to the PCT or their chosen agent? The purchaser is again different, and although the content of the package may stay the same, the service user is now getting health care services because of their change of status, not social care. So maybe there would be no old style transfer, either.
  • Supposing the service user has a direct payment and engages an agency. The service user then re-commissions from another agency for the same task description. Do the Regs apply because of the service provision change? Possibly, if there was an organised grouping of employees – such as a specific member of staff or team of staff concentrating on the client.
  • Supposing the Client has a direct payment but loses capacity to manage the DP – even with assistance. A relative is appointed by the council to be the Suitable Person. Does the old employee automatically transfer to the new Suitable Person’s employment, because of TUPE? The Suitable Person, in law, is not carrying out the client’s contracts ‘for’ them, as statutory agent; the SP is going to buy services or employing the person in his or her own name, and must be able to decide. Ie the ‘different purchaser’ approach suggests No Service Provision Change, but termination of the worker’s contract with an offer of another one by another person. If a self-funding person acquired a welfare Deputy or a lasting power of Attorney holder then took over, there would be no cessation of employment, and no need for a TUPE transfer to be considered, as such, as those roles do carry with them the authority of a statutory agent.

The Daynes saga – a TUPE sham!

A council had a bit of a problem with a poor provider, and ratcheting up the performance with a ‘carrot and stick’ approach simply did not work. It was ultimately decided to terminate the contract. But the contract was for a clear chunk of service for particular clients who were geographically linked and with similar needs.

At the last moment a council officer had the wizard wheeze of suggesting that the council should award direct payments to the clients in question, to avoid the application of TUPE. This was done, and the clients somehow decided (despite their mental impairments) to pool their direct payments and choose the preferred provider of the council.

Provider no. 1 did not have any other work for the staff, so suggested that TUPE applied, so as to transfer the staff over to Provider no. 2. Assets of the first provider company were also intended to transfer to the second provider – care plans that the contractor had done, etc. Proceedings were launched, and the council was joined in as an interested party.

What happened?

The tribunal learned all about personalisation over an 11 day hearing with good employment and local government law barristers on the case.

The Chair said that social care policy had to take second place to employment law, and that these direct payments were a sham and clearly intended to avoid TUPE, and should be ignored.

The council had to pay provider no. 2 to get rid of the staff that had been entitled to TUPE over.

The case is actually very helpful, for what it might (but does not necessarily) imply: if a direct payment is a genuine choice of the client, it amounts not to a service provision change, by the council, but the cessation of a provision function by the council, and the commencement of a purchasing function by the client, possessed of money which has become his or hers to spend privately.

Putting this another way, if the DP is real, and not imposed or foisted upon the client, the fact that the ultimate ‘human’ purchaser is not the same as the first ‘council’ purchaser, means that the SPC rules can’t apply, and that TUPE does not necessarily apply to create an old-style transfer.

 

 

Summary of advice given by Employment Lawyers, but never made public:The TUPE Regulations provide employment rights to employees when their employer changes, as a result of a transfer of an undertaking. But there’s been an extension of TUPE to cover service provision change, when a purchaser changes purchasing arrangements to a new provider.

 

 

The Advice, obtained from Employment Law experts, Short Richardson and Forth, examines the implications of the TUPE regulations for people choosing to take a Direct Payment form of personal budget.

 

 

The question asked of the law firm was whether a TUPE transfer inevitably occurs, could occur, or could not occur, when a personal budget is taken by an individual as a direct payment, for the purposes of either employing a carer or contracting with an agency or service provider to provide care. The relevant staff potentially benefiting from transfer to the employment of the individual or to the agency chosen by the client would be the staff of the council, or the council’s contractor, who had previously been active in the delivery of care and support arrangements for the service user in question. Choice and control could be severely curtailed if TUPE effectuates a transfer. The Advice concludes that there is little risk of this being the approach of a Tribunal, despite the prevalence of the stance “TUPE applies 99% of the time”.

Direct payments legislation allows the service user for a direct payment in lieu of being owed a statutory duty by the council, to meet eligible assessed needs. He or she can make whatever arrangements to meet their own needs as preferred, as long as the money is spent within the confines of the kinds of services that would have been bought for them by the Council under community care legislation, and meets the assessed eligible needs, including employing someone. Some choose to form a contract of service with one or more workers who are known as personal assistants, or a contract for services with companies that employ their own workers to deliver services.

Having analysed the effect of the regulations governing direct payments with regard to what happens to the council’s provision duty, during the currency of a Direct Payment, the Advice concludes that a council’s statutory duty of provision is suspended, effectively, if and for so long as the council maintains its offer to make a direct payment. It concludes that this legislative structure does not connote a relationship of principal and agent, so far as the council and the direct payment client are concerned, or the delegation of the council’s function of making arrangements to meet needs, to the client. It explicitly provides for the displacement of the statutory function in certain circumstances, but provides for its resurrection as soon as the council is less than satisfied by the efficacy of the person’s own arrangements to meet need. It is thought that this may be relevant to how a tribunal would look at the facts and its interpretation of the consequences, when the issue comes to be decided.

The Advice analyses whether the transfer of an undertaking occurs (ie an economic entity, which retains its identity), when a Direct Payment is chosen, and a person is employed – and secondly, whether a service provision change occurs for the purposes of the Regulations.

The Advice concludes that it is doubtful that there could ever be a service provision change when a person takes a direct payment for the purposes of employing someone or contracting with a third party care provider, given that the wording of the relevant regulation requires that the client on whose behalf the activities are carried out – both before and after the change – must be one and the same. When a council is procuring services, it is the client, in a contractual sense, and once a person has taken a direct payment, that person becomes the purchaser and the client, so ‘the client’ is no longer the council. Before the election, those services were previously carried out by the staff of a contractor on the council’s behalf, or by staff of the council itself for the council, since the activities were the discharge of the statutory provision function. The direct payment legislative structure does not appear to make the recipient of the payment into the agent or the sub-contractor of the council for the purposes of one and the same provision function that is imposed by statute on the council.

In addition, what can be said as a matter of general principle is that where “activities” are different in terms of the position before and after the transfer there can be no service provision change for the purpose of the Regulations. Since the motive behind taking a direct payment is choice and control, the Advice concludes that in most cases that the activities will generally be carried out differently, even if the outcome is the same.

The Advice is less certain that there could never be an old-style TUPE transfer in a direct payment situation, because the test of whether there is a transfer of an undertaking is quite different from that under the regulation for service provision change.

The Advice takes the view that a service user who takes a direct payment for merely buying in services for their own purposes (as a consumer, rather than as a producer) could not be said to be taking a transfer of an ‘economic entity’ – such is defined by regulation 3(2) as “an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary.”

The Advice deals with an employment tribunal case of Daynes, involving a so-called direct payment in which both a service provision change and a standard business transfer were found to have occurred. However, the Advice explains why the facts of that case probably explain the particular decision. In particular, the Tribunal called the direct payment arrangement a ‘sham’, designed to avoid the application of the Regulations, and consequently looked beyond the labels applied to the arrangements. The facts as found actually fit the Advice authors’ analysis of the service provision rules regulations (the client both before and after the change, was, in reality, the council, simply changing its service provider) and with general TUPE principles about the transfer of an undertaking, once the services have been characterised as asset-reliant rather than labour intensive. The Advice does not therefore take the case to be of any weight in relation to the correct analysis of TUPE application in the context of a genuine decision on the part of an informed service user or their Suitable Person to take on a direct payment.

The Advice asserts that it could only be in a small minority of cases in which a transfer could be found. The main reason given is that transfers are governed by a multi-factorial test and the mere change of a service provider is not a transfer for these purposes. It does not suggest that it could NEVER be said that a transfer would arise from the client’s choice to take a direct payment. One example where TUPE might well apply is where a service user has been the subject of a specialist package in a particular setting where a person chooses a direct payment after a package in which a small number of specially skilled and trained staff have been allocated to servicing the person’s complex needs on a shift pattern, to the exclusion of all other work. An adult service user, fitting this service profile, or their Suitable Person, if the service user lacks capacity to understand the significance of the issue, must therefore receive explicit information about TUPE before using a Direct Payment to consider employing a carer if they have been previously served through council arrangements by one or more individuals who were engaged only on that person’s care and support package. Similarly, if an adult uses the direct payment to contract with a third party care provider and positively asks for the current carer or carers employed by the Council or a previous contractor to be engaged by the third party provider to deliver the services in the same manner as before, a transfer could ensue. Where the activities are labour intensive, the taking over of employees (or the fact that the employees were not taken on) can be a decisive factor in the transfer analysis. Assuming that care and support activities were seen as “labour intensive”, whether TUPE applied to create a transfer would therefore depend on whether the employees(s) are actually taken over.

Part II of the Advice goes through a hypothetical contracting out exercise by a council to a local authority Trading Company. This is then followed later by the decision of a large number of clients to take direct payments, spend them in various ways, and then some return to the council’s own commissioned arrangements. Part II analyses how the principles in Part I might be applied by a Tribunal, considering TUPE. The following conclusions may be drawn from the Advice:

  • Out-sourcing part of a council service for the first time to one provider – TUPE very likely to apply (on both ‘service provision change’ and old-style transfer grounds)
  • Outsourcing a service to many providers – TUPE may not apply, because of fracturing
  • Mini-competition for redistribution of the original domiciliary care contracts as between the council and old and new contractors – TUPE very likely to apply, but not so likely in relation to staff now working on wider range of contracts eg for self funders
  • Mini-competition for redistribution of only ¾ of the original domiciliary care contracts because of election of clients now to take a direct payment – TUPE still likely to apply in relation to what remains of the council’s need to contract, albeit for fewer clients
  • Individual clients electing to take direct payments – TUPE likely not to apply, other than in a small minority of specialist care package situations
  • Direct payment clients pool their payments and buy as a group – TUPE slightly more likely to apply but by no means probable.
  • Direct payment clients buy separate services from different agencies – TUPE not likely to apply to transfer previous provider’s staff to new agencies.
  • Direct payment client changes his or her package from an agency purchase to an employee – TUPE not likely to apply to transfer agency worker to client’s own employment
  • Direct payment client changes package from having an employee to using an agency – TUPE likely to apply to transfer the employee to that agency, albeit not necessarily to the client’s care package contract. This position, once it is understood in the care sector, may make it hard for clients to get agencies to take them on as clients, after they have tried employing individuals for themselves. It also has implications for what Direct Payment Support organisations are going to have to tell clients about direct payments pros and cons, in general.
  • In-sourcing of an ex-direct payment client’s package back to the council – TUPE capable of applying but improbable, unless the council decides to meet the need in the same way as before.
  • “Unregulated” workers can be employed by a direct payment client. If the council was faced with a possible “TUPEing” in of certain employees who they could not normally employ legally or lawfully, that would seem to present the council with the opportunity of dismissing those employees, after transfer, for an ETO reason i.e. an economic, technical or organisational reason entailing changes in the work force.

Further enquiries should be made of the firm itself.

The latest case on TUPE in social care – Addison v Community Integrated Care

The issue was whether the sole or principal reason for the dismissal of loads of ex NHS staff was a transfer and therefore automatically unfair under the TUPE regs.

The staff had transferred in 1996!! But in 2011, 15 years later, Cumbria said that unless CIC would find a way of cutting its prices it would not keep the work, and CIC refused. CIC had tried to negotiate, and then dismissed the staff and offered new contracts.

The Tribunal found that clearly but for the transfer the staff would not have been selected for dismissal, but that it was not the sole or principal reason for the transfer!

However, the BUT FOR… test was not applicable, because the real question was what was the reason that caused the employer to dismiss the staff, and the sole or principal reason was the employer’s need to make savings in order to retain the Cumbria Council work. Mere passage of time would not destroy the causal link between the transfer and a dismissal, but in this case the need to make the savings amounted to a supervening event some 15 years after the transfer and so the dismissal was not automatically unfair.

All providers need to discuss this with HR staff, and make it clear that at some point they might have to take the unions on, if councils start quoting this to providers, regarding why they could cut their fees, regardless of the TUPE obligations.

 

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