TUPE and economic activity: Court of Appeal clarifies the boundary

Background

In the case of Dr Marcus Bicknell and another v NHS Nottingham and Nottinghamshire Integrated Commissioning Board, the Court of Appeal considered whether employees were protected by TUPE following the transfer of functions between public bodies. The key issue was whether the transferring entity was an “economic entity” engaged in “economic activity” for the purposes of TUPE.

The claimants worked for NHS clinical commissioning groups, which are responsible for commissioning healthcare services in particular geographic regions. After multiple of the groups merged, the claimants argued that commissioning services connected to a market should amount to economic activity, bringing the transfer within TUPE. The employer argued that commissioning alone was not enough, as the entity did not itself provide goods or services on a market.

Court of Appeal decision

The Court of Appeal unanimously dismissed the appeal and upheld the approach taken by the Employment Tribunal and the EAT. It confirmed that economic activity, for TUPE purposes, means offering goods or services on a market. Purchasing or commissioning services from others, without also supplying those services, does not in itself amount to economic activity.

Importantly, the Court rejected the argument that employment cases should adopt a broader or more protective concept of economic activity than competition law cases. The same definition applies across both contexts, and it would be incoherent for different principles to apply depending on the type of dispute. The Court also confirmed that where an entity is not engaged in economic activity, TUPE cannot apply and there is no need for a separate analysis of the public administrative functions' exclusion.

The Court further endorsed a substance-over-form approach. How a transfer is labelled, or whether the parties assumed TUPE applied, is not determinative. The focus must be on what the entity actually does in practice.

Learning points for employers

This decision reinforces that TUPE does not apply simply because activities are connected to a market or involve buying services that are later delivered by others. Employers should assess carefully whether the transferring entity is itself providing goods or services on a market, rather than commissioning, regulating or administering them. In restructures involving public bodies, charities or hybrid organisations, clarity around core functions and any genuinely economic activities will be critical to managing TUPE risk and setting expectations for affected staff.

For more information or advice, please contact Sofia Efstathiou in our Employment team.