Staffing pitfalls arising on the closure of a care home and the transfer of its service users and care workers to a third party

The environment for running care homes continue to be challenging with pressures on costs being paid by local authorities and charged to private service users as well as the recruitment and retention of staff whether permanent or 'bank staff'. Equally challenging is the closure  of a home where no buyer can be found for the closing business and the need to find a new home for existing service users and employees. This scenario was the backdrop of the recent decision in Newman and others v (1) Rollandene Care Limited and (2) Mansfield Care Limited [2024] EAT18.   

The 1st Respondent, Rollandene Care Limited operated a care home which the owner planned to shut down. It was agreed that the residents, a mix of private and socially-funded, would transfer to two homes run by Mansfield Care the 2nd Respondent. The 1st Respondent had 17 employees and it referred to 12 as bank staff. The 2nd Respondent said that it would employ them however an issue arose as to the terms upon which Mansfield Care Limited would employ them. When the 1st Respondent’s care home closed down, some of its staff started working for the 2nd Respondent.

The employment tribunal held there had been two TUPE transfers when the residents were moved to homes run by the 2nd Respondent. There was a traditional 'business transfer' of the privately-funded residents, and a 'service provision change' in relation to the socially-funded residents. However for there to be a business transfer there needs to be a transfer of an economic entity which retains its identity following transfer, [regulation 3 (1) (a) TUPE 2006]. For a service provision change under regulation 3 (1) (b) of the 2006 regulations, relevant activities cease being carried out in this case for the socially funded service users by Rollandene and were then carried out by Mansfield Care Limited.

The Employment Appeal Tribunal, disagreed with the tribunal's decision in particular the defining of privately funded service users and those whose fees were paid by the Local Authority, and held  that it had not explained how the privately-funded residents were an 'economic entity' that transferred to Mansfield Care and retained its identity following transfer. An economic entity for this purpose within the meaning of the 2006 regulations is defined as "an organised grouping of resources that has the objective of pursuing activity whether or not such activity is central or ancillary to such activities". The movement alone of a privately funded group of service users to a new care home did not amount to an economic entity. Furthermore the tribunal had not  shown that there was a separate group of employees assigned only to the socially-funded residents to justify a finding of a ‘service provision change’ as upon the face of it the employees looked after both categories of service users. The Employment Appeal Tribunal held that the tribunal’s reasoning on TUPE could not stand.

The effect of the ruling is that the staff who started working for Mansfield Care Limited were not entitled to transfer upon their existing terms of employment or indeed had continuity of employment as TUPE did not apply. However the case has been remitted back to the employment tribunal for fresh consideration of the facts insofar as they apply to the TUPE regulations 2006.The other consequences for Rollandene was that they had failed to engage in a collective redundancy consultation leaving itself exposed to protective awards.

Those parties who are involved in the closure of care homes or who are taking over activities from such homes which are closing  need to be mindful of the need to carefully examine the structure of any proposed transfer of activities which may have implications for the staff engaged or employed in carrying out such activities.

For more information, please contact Michael Delaney in our Employment team on 07909 912 564, or complete the form below.