Newman & Ors v (1) Rollandene (2) Mansfield Care

In Newman & Ors v (1) Rollandene (2) Mansfield Care, the Tribunal considered whether a change in care home provider for residents could constitute a business transfer for some and a change in service provision for others.

The Facts

The First Respondent (Rollandene) operated a nursing home providing residential care and nursing services, which they had planned to shut down. Rollandene had entered into discussions for the sale of the business with the Second Respondent, a care company (Mansfield Care) where it was agreed that the residents of Rollandene’s property would move into two of Mansfield Care’s existing nursing homes. Some of the residents were socially funded by the local authority, and some were privately funded.

Rollandene had 29 members of staff working at the care home at the time; 17 described as ‘employees’ and 12 described as ‘bank staff’. Mansfield Care had said that it would employ all staff in one of the two homes where residents would be relocated. When Rollandene’s care home shut, only six members of staff started working for Mansfield Care.

Rollandene’s staff brought claims for failure to inform and consult under section 188 of TULRCA, redundancy pay, unfair dismissal, wrongful dismissal and unpaid holiday pay and wages. The company defended the claims on the basis that there was a TUPE transfer of the staff to Mansfield Care, and there was no redundancy situation so section 188 of TULRCA did not apply. They also argued that, as bank staff should not be included within the headcount, there were less than 20 employees at the relevant time, and so, the collective consultation requirements were not triggered.

The Legal Bit

TUPE

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) (TUPE) apply where there is either:

• A transfer of a business, undertaking, or part of a business or undertaking, where there is a transfer of an economic entity that retains its identity (a business transfer) An "economic entity" is defined as "an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary" (regulation 3(2)).
• A client engaging a contractor to do work on its behalf, reassigning such a contract or bringing the work "in-house" (a service provision change (SPC). It is a condition of an SPC that, immediately before the transfer, there must be an organised grouping of employees whose principal purpose is the carrying out of the activities on behalf of the client (regulation 3(3)(a)(i)). Further, the client intends that the activities will, following the SPC, be carried out by the transferee other than in connection with a single specific event or task of short-term duration (regulation 3(3)(a)(ii)).

Collective redundancy consultation

Under the Trade Union and Labour Relations (Consultation) Act 1992 (TULRCA), an employer is obliged to collectively consult if it "is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less" (section 188(1)).

Employment Tribunal decision

The employment tribunal found that there had been two TUPE transfers. There had been a 'business transfer' of the privately funded residents, and a 'service provision change' in relation to the socially funded residents. The employment tribunal also held that there had been a failure to consult on proposed redundancies on the basis that bank staff engaged by Rollandene were 'employees' under s230 of the Employment Rights Act 1996. This meant that they should count towards the numbers for collective redundancy, taking the total over 20.

Employment Appeal Tribunal decision

Both Rollandene and Mansfield Care appealed the ET’s decision in respect of their findings on TUPE, employment status and collective redundancy.

The EAT overturned the employment tribunal’s decision and found that it had not properly explained its conclusion that the privately funded residents were an 'economic entity' that retained its identity. In relation to SPC, the Tribunal also had not explained how it had identified a separate group of employees assigned only to the socially funded residents. The EAT sent the question of whether a TUPE transfer had occurred back to the employment tribunal to be reconsidered and explained.

On collective redundancy consultation, the EAT made no finding that redundancies were proposed. The only finding of fact made was that Rollandene hoped that its staff would continue in employment with Mansfield Care. There could not, therefore, have been a failure to collectively consult on redundancies. However, the tribunal found that if a redundancy situation existed, the tribunal had been correct on the facts to include staff referred to as ‘bank staff’ in calculating whether 20 or more employees were at risk.

Comment

Employers should note that it is possible for a transfer to constitute both a business transfer and an SPC as the two are not mutually exclusive. The issue in this case was that the tribunal had not explained its reasoning for concluding that there was a business transfer of privately funded residents and at the same time an SPC of those who were socially funded.

While collective consultation obligations were held not to apply in this case, every transfer situation is slightly different, and it is important to consider all the facts and circumstances. These include the possibility that, as in this case, staff who you do not consider to be ‘employees’ in an everyday sense might fit that definition for the purposes of the 20-employee collective redundancy threshold. Any discussions between the outgoing and new employers about what is expected to happen post-transfer, will also be relevant.

If you have any questions or concerns about the whether an upcoming transaction or restructure will engage TUPE or collective consultation rules, please get in touch and we will be happy to assist.