Does TUPE spell trouble for NHS dental contracts?
DENTAL BULLETIN, ISSUE 63
The Transfer of Undertaking Regulations, or TUPE for short, offers enhanced protection for employees who transfer from one business to another. It is an extremely complex and confusing piece of legislation. Here we set out the key principles to help you better understand when it might apply.
What is TUPE?
TUPE requires a business that is buying another business to take on any employees connected with that business.
It applies in three situations:
- Where one business buys the whole or part of another business;
- Where a business decides to take services back in-house, for example they use an IT contractor but wish to start undertaking the services themselves;
- Where a business decides to outsource a service, for example it tenders for cleaners to undertake the office cleaning or it re-tenders that contract.
Whilst it is obvious TUPE will apply when you buy a practice, the question of whether TUPE applies when you tender for an NHS contract is more complicated. The NHS is a business which is outsourcing its services. A move from one provider to another would normally come under point 3 above. On the face of it therefore TUPE would apply.
Business Entity
In order for TUPE to apply the business that is being sold must be an ‘economic entity’. This means:
- It is an economic entity with assets, employees, goodwill etc that is operating as a business;
- There is a transfer of that economic entity; and
- The economic entity retains its identity after the transfer.
Again when you buy a practice it will retain its economic identity as you are buying all the goodwill and assets of that business.
However, how does this apply to a tender for an NHS contract?
Unfortunately this is not an easy question to answer. It will very much depend on whether patients are transferring from the old practice to the new one. A group of NHS patients that moves with the NHS contract could be seen as an economic entity. Any employee who provides treatment to those patients for the majority of their time at work would therefore transfer with the contract. This could mean the nurses and support in a specialist practice that loses its NHS contract will be TUPE transferred to the practice that has won the contract.
Remember TUPE applies to employees only; not workers or those who are self-employed.
Enhanced Protection
Any employee automatically transfers from one business to another and their existing contract survives. In effect the new employer is stepping into the shoes of the old employer. There are very few rights that do not transfer, such as occupational pension schemes. Otherwise all other rights and liabilities will transfer. There are also very limited circumstances in which you can amend an employee’s contractual terms.
You will also need to inform and consult any employees who are affected by the transfer. This duty is on both the old and new employer.
In addition you cannot dismiss an employee as a result of the transfer unless you can show an Economical, Technical or Organisational (ETO) reason for doing so. For example, if you are a practice that wins a new NHS contract and has to take on new employees but you have sufficient employees for the work you tendered for, you may have an economical reason for dismissal, namely redundancy.
Due Diligence
If you are taking on employees from another business you need to make sure you do your due diligence. You will need to obtain information about those employees, including whether they have any outstanding grievance or disciplinary matters. As set out above, any liabilities pass to you and if you are not aware of an outstanding grievance you could have a claim issued against you.
You also need to ensure you have a well drafted transfer agreement, so that if the above were to happen, you will be indemnified by the old employer in respect of any claim issued against you.
That is a lot to think about!
TUPE is a complex area of law with many nuances. If you have any concerns about whether it applies, take legal advice and get proper agreements drawn up to protect you. The consequences of getting it wrong can be high.
If you need advice or assistance on TUPE, please contact Laura Pearce on 020 7388 1658 or email her at lpearce@jfhlaw.co.uk.
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Laura Pearce, Senior Solicitor
Please note that the information contained in this article was correct at the time of writing. There may have been updates to the law since the article was written, which may affect the information and advice given therein.
