Commissioning Alone Is Not “Economic Activity” Under TUPE: A Single EU-Law “Undertaking” Test for Competition and Employment
1. Introduction
This appeal addresses when TUPE protection is triggered during public-sector restructuring, and specifically whether a commissioning body’s activities amount to “economic activity” so that a transferred grouping qualifies as an “economic entity” under TUPE and Directive 2001/23/EC.
Dr Bicknell (a GP clinical lead employed by a Clinical Commissioning Group) was dismissed during the process by which six Nottinghamshire CCGs were merged (and later replaced by an integrated commissioning structure). He brought Employment Tribunal claims including unfair dismissal and breach of contract. The British Medical Association (BMA) brought a claim alleging breach of TUPE consultation duties.
The Employment Tribunal (ET) held TUPE did not apply because the CCG’s core activity—commissioning—was not “economic activity”; however it upheld Dr Bicknell’s ordinary unfair dismissal claim under section 94 of the Employment Rights Act 1996. The Employment Appeal Tribunal (EAT) dismissed appeals, while noting some doubt about whether competition-law reasoning should simply be transplanted into employment cases. The Court of Appeal dismissed the appeal, endorsing a single coherent “economic activity/undertaking” concept across competition and TUPE contexts for pre‑31 December 2020 events governed by EU law.
2. Summary of the Judgment
The Court of Appeal held:
- The definition of “undertaking/economic activity” must be approached coherently across EU internal market regimes; it would be “incoherent” to apply different principles in competition disputes and TUPE disputes.
- Commissioning/purchasing goods or services, without itself offering goods/services on a market, does not constitute “economic activity” for TUPE purposes.
- FENIN does not support treating a commissioner’s activity as economic merely because third-party providers later supply services in a market; the relevant inquiry concerns the activity of the entity in question.
- TUPE does not “secretly” broaden (“gold-plate”) “economic activity” beyond Directive 2001/23/EC; the language tracks the Directive and must be interpreted consistently with Court of Justice case law.
- If an ET confidently finds there is no “economic activity”, it need not separately run a full Regulation 3(5) analysis; the absence of economic activity is sufficient to conclude TUPE does not apply.
- The ET’s misattribution of a passage to the Advocate General (when it was from the Court of Justice) was immaterial because the ET correctly treated itself as bound by Nicholls.
3. Analysis
3.1 Precedents Cited
Federación Espanola de Empresas de Tecnología Sanitaria v Commission of the European Communities (Case T-319/99) [2003] 5 CMLR 1 (Court of First Instance); (Case C-205/03) [2006] 5 CMLR 7 (Court of Justice) ('FENIN')
Role in this case: Central authority on whether purchasing/commissioning can be “economic activity”.
The Court of Appeal treated FENIN as confirming the orthodox EU concept: an “undertaking” is an entity engaged in “economic activity”, and the “characteristic feature” of economic activity is offering goods/services on a market, not purchasing “as such”. The Court emphasised that FENIN does not decide that one body’s purchases become economic because another body downstream uses the purchases in market-facing activity. On the facts of FENIN, the same organisations both purchased and ran the relevant healthcare function; the purchasing was characterised by reference to the nature of that same entity’s subsequent use.
Key doctrinal move adopted here: the “dissociative approach” to purchasing—purchasing is not economic activity unless it is part of (i.e., carried on by the same entity as) an activity that offers goods/services on a market.
Nicholls v Croydon London Borough Council [2019] ICR 542 ('Nicholls')
Role in this case: The binding domestic articulation (EAT) applied by the ET, upheld by the EAT, and ultimately endorsed in substance by the Court of Appeal.
The Court of Appeal accepted that Nicholls correctly reflects EU law: “commissioning/buying” is not in itself economic activity; it becomes economic only where the commissioner also supplies goods/services on a market. The appeal’s primary aim was to dislodge that proposition—either by re-reading FENIN or by arguing that employment cases should adopt a broader, employee-protective meaning of “economic activity”. The Court rejected both.
Importantly, the Court also clarified how to understand Nicholls procedurally: where the case is “clear” on economic activity, an ET is not required to apply every factor or question identified in Nicholls for borderline cases.
BetterCare v The Director General of Fair Trading (Case No. 1006/2/1/01 [2002] Competition Appeal Reports 299 ('BetterCare')
Role in this case: Background comparison illustrating that not all domestic competition analysis aligns neatly with FENIN.
BetterCare was discussed in Nicholls and revisited here to show the possible tension between domestic competition reasoning and the later, clearer EU approach. While the Advocate General in FENIN referenced BetterCare, the Court of Appeal in this case treated the controlling EU position as that expressed by the Court of Justice in FENIN, rather than any broader domestic competition tribunal approach.
Henke v Gemeinde Schierke (Case C-298/94) [1997] ICR 746 ('Henke')
Role in this case: The conceptual source for excluding “administrative reorganisation” between public authorities, reflected in TUPE Regulation 3(5) and discussed in Nicholls.
In the present appeal, Henke mattered less directly because the Court held the threshold “economic activity” condition was not met; nonetheless, it remained part of the legal architecture: public administrative reorganisation is outside TUPE’s scope where there is no relevant “economic entity” transfer.
Collino v Telecom Italia SpA (C-343/98) [2002] ICR 38
Role in this case: Supporting the proposition that EU courts use the same “undertaking/economic activity” concept across internal market domains, including transfers.
The Court of Appeal cited Collino v Telecom Italia SpA as part of the broader confirmation that Court of Justice case law on “undertakings” informs the transfer-of-undertakings field, reinforcing the “single coherent concept” approach.
Mayeur v Association Promotion de l'Information Messine (APIM) (C-175/99 [2002] ICR 1316 AG58
Scattolon v Ministero dell'Istruzione, dell'Universita e della Ricerca (C-108/10 [2012] ICR 740 AG51)
Role in this case: Advocate General material cited to show continuity of reasoning and cross-fertilisation between competition and transfer contexts.
The Court relied on these references to buttress the methodological point: EU law does not splinter the definition of “undertaking” depending on whether the dispute is competition-focused or employment-protective.
British Gas Trading v Lock [2016] EWCA Civ 983; [2017] ICR 1
Role in this case: The EAT used this authority when considering whether it could depart from a previous EAT decision (Nicholls) and whether that earlier decision was “manifestly wrong”. This framed the appellate discipline applied below, which the Court of Appeal ultimately found had been properly respected.
Uber v Aslam [2021] UKSC 5; [2021] ICR 1657
Role in this case: Invoked by the appellants for a purposive, employee-protective interpretive approach (including reliance on Lord Leggatt’s discussion). The Court of Appeal held that such purposive generalities could not justify changing the settled EU-law meaning of “economic activity” that anchors the gateway to TUPE applicability.
3.2 Legal Reasoning
(a) The unifying premise: one EU “undertaking/economic activity” concept
The Court’s key jurisprudential move was to reject the idea of context-specific definitions. It held that the EU internal market framework uses “undertaking” as a functional concept to demarcate when market-regulating rules apply. Because competition rules and the transfers directive both serve internal market objectives, the legal concept should not fracture into distinct “competition” and “employment” meanings.
The Court considered it would be “incoherent” to apply different principles as between competition and employment cases.
(b) Commissioning is “buying”, not “offering”
On the ET’s findings (not disturbed), the CCG’s central function was commissioning—planning, purchasing, and monitoring health services. The ET made specific findings that it did not itself provide services on a market (including rejecting evidence suggesting it provided certain pharmacy services).
The Court endorsed the legal significance of that fact-pattern: the “characteristic feature” of economic activity is offering goods/services on a market; commissioning without market-facing supply does not cross the threshold.
(c) The appellants’ two alternative routes under Ground 1 both fail
- “FENIN is right but misunderstood”: The Court held FENIN does not support aggregating the commissioner’s purchases with third-party providers’ later market supply. FENIN links purchasing to the purchasing entity’s own subsequent use, not to someone else’s downstream use.
- “FENIN is wrong (or shouldn’t apply in employment)”: The Court held it was not open to depart from FENIN, and in any event it would reject the proposition in principle. More importantly, it rejected the premise that employment-protective aims permit redefining “economic activity” to pull non-market public functions into TUPE.
(d) TUPE does not broaden “economic activity” beyond Directive 2001/23/EC
The appellants’ Ground 2 tried to use domestic interpretive canons and “gold-plating” arguments to widen TUPE’s gateway beyond EU law. The Court’s response was straightforward: the relevant TUPE provisions track the Directive’s text, and there is no “hidden” relaxation of the concept. While section 38 of the Employment Relations Act 1999 empowers the Secretary of State to go beyond the Directive (and was used to introduce “service provision change”), that does not rewrite Regulation 3(1)(a)’s “economic entity” test.
(e) Regulation 3(5): when an ET must (and need not) address it
The appellants argued the ET erred by not separately considering TUPE Regulation 3(5) (administrative reorganisation between public authorities). The Court held the argument misunderstood Nicholls. In cases where the tribunal is satisfied there is no “economic activity”, TUPE is already excluded; an additional Regulation 3(5) inquiry is unnecessary.
The Court added an important clarification: Lavender J’s “two mutually exclusive alternatives” framing in Nicholls was expressed as applying to “a case such as the present” (i.e., boundary cases involving public functions), and should not be overgeneralised to all conceivable fact patterns (for example, non-economic activity by a charity might involve neither market activity nor exercise of public authority).
(f) Ancillary activities and Regulation 3(2)
Ground 4 contended that even if commissioning was non-economic, ancillary activities could still mean the entity’s objective was to pursue “economic activity” (Regulation 3(2): central or ancillary). The Court held the ET had, in substance, addressed ancillary matters and made permissible findings that the alleged ancillary functions did not amount to market supply; in particular it rejected the claimant’s factual case about pharmacy services and accepted evidence the CCG was not registered to provide medical services.
3.3 Impact
(a) Public-sector commissioning bodies and NHS reorganisations
The decision cements a restrictive gateway for TUPE in public-sector commissioning restructures: where an entity primarily “buys” or “commissions” services (even from private providers operating in a market), TUPE may not apply unless that entity itself is offering goods/services on a market. This is particularly significant for NHS commissioning bodies whose statutory role is to arrange provision rather than provide.
Practically, this increases the likelihood that employees affected by commissioning reorganisations will need to rely on:
- ordinary unfair dismissal principles (as Dr Bicknell successfully did under section 94 of the Employment Rights Act 1996);
- contractual rights and public-law constraints (where relevant); and
- political/administrative commitments to “act as if TUPE applied” (not legally determinative, as the ET noted).
(b) Doctrinal coherence across EU internal market fields
The Court’s strongest “new law” contribution is methodological: the meaning of “economic activity/undertaking” is not to be re-tuned according to whether the case is competition-oriented or employee-protective. That proposition limits future attempts to argue that EU-derived employment protections can enlarge their own jurisdictional gateway by a purely purposive approach.
(c) Litigation strategy and tribunal reasoning
The judgment also signals that where the absence of economic activity is clear on findings of fact, tribunals need not produce elaborate alternative analyses under Regulation 3(5). Conversely, in “boundary” cases, the Nicholls factors may still be important, but this case illustrates that not every public-sector transfer demands a full “public authority” dissection if the economic activity threshold is not met.
4. Complex Concepts Simplified
- “Economic entity” (TUPE Regulation 3(2)): an organised grouping of resources aimed at pursuing an economic activity. It is the “thing” that must transfer (and retain identity) for TUPE to apply.
- “Economic activity”: in EU law, typically “offering goods and services on a given market”. Buying/commissioning alone is not enough.
- “Undertaking”: the functional EU concept capturing entities engaged in economic activity, regardless of legal form or funding.
- Commissioning vs providing: commissioning is arranging/planning/purchasing services from providers; providing is the actual supply of services to users/patients/customers. This case treats commissioning, without provision, as non-economic.
- Regulation 3(5) TUPE: excludes “administrative reorganisation” or transfer of administrative functions between public administrative authorities.
- Automatic unfair dismissal (TUPE Regulation 7): if TUPE applies, dismissal because of the transfer is automatically unfair unless justified by an ETO reason.
- ETO reason: an economic, technical or organisational reason entailing changes in the workforce; a statutory escape route from automatic unfairness.
- “But-for” test: a causation tool used by tribunals to ask whether dismissal would have occurred “but for” the relevant event (e.g., the transfer/reorganisation).
- “Gold-plating”: domestic implementation going beyond EU minima. The Court held there was no hidden gold-plating of “economic activity” in TUPE Regulation 3(1)(a), notwithstanding other extensions (e.g., “service provision change”).
5. Conclusion
Bicknell & Anor confirms that “economic activity” is a single EU-law concept that cannot be broadened in TUPE cases merely because employee protection is at stake. Commissioning/purchasing—without the commissioner itself offering goods or services on a market—does not constitute economic activity. As a result, public-sector reorganisations that move commissioning functions between public bodies may fall outside TUPE’s transfer protections, even where third-party providers operate in a healthcare market. The judgment strengthens doctrinal coherence across EU internal market regimes and narrows the scope for purposive arguments to expand TUPE’s threshold applicability.
Comments