Summary of Court of Appeal Opinion (Anonymised)

Factual and Procedural Background

Appellant was employed as a clinical lead by a Clinical Commissioning Group ("Organization A") within The Health Service. Organization A and five other CCGs planned and implemented a merger leading to the creation of a new body. Appellant's employment was terminated in the course of that reorganisation and he brought claims in the Employment Tribunal ("the ET") including unfair dismissal and breach of contract. Company A (an employees' association) brought a claim alleging a breach of a duty to consult. The ET dismissed all claims except Appellant's claim of unfair dismissal under section 94 of the Employment Rights Act 1996. Appellant and Company A appealed to the Employment Appeal Tribunal ("the EAT"), which dismissed their appeals but expressed some doubt about prior authority in Nicholls v Croydon London Borough Council. Permission to appeal to this Court was granted. On this appeal the Court dismissed the appeal, holding there was no material error of law in the ET's reasoning and that the ET and the EAT were correct in their approach to the definition of "economic activity" under TUPE and the relevant Directive.

Legal Issues Presented

1. Whether the activities of Organization A (primarily commissioning healthcare services) amounted to an "economic activity" or an exercise of public administrative functions for the purposes of Directive 2001/23/EC and TUPE.
2. Whether the reasoning in competition cases (in particular FENIN) should be applied, or applied differently, when deciding whether an entity carries on "economic activity" in the employment/TUPE context.
3. Whether the ET erred in law by failing to consider the application of regulation 3(5) of TUPE (the public administrative functions exclusion).
4. Whether ancillary functions of Organization A should be aggregated with its central commissioning role for the purpose of determining whether it is an economic entity.

Arguments of the Parties

Appellant's Arguments

• Economic activity includes commissioning connected with a market; commissioning that results in services offered on a market should be treated as economic activity (relying on FENIN and related reasoning).
• Alternatively, FENIN is distinguishable or wrongly applied in employment/TUPE cases and a purposive interpretation of TUPE (protecting employees) requires a wider meaning of "economic activity".
• The ET erred in law by not considering regulation 3(5) of TUPE and by failing to account for ancillary activities that could render Organization A an economic entity.

Respondent's Arguments

• Purchasing or commissioning, as such, does not amount to economic activity; FENIN supports dissociating purchasing/commissioning from subsequent use unless the purchaser itself supplies goods/services on a market.
• The same definition of "economic activity" used in competition law applies in the TUPE context; Directive 2001/23/EC and TUPE should be interpreted consistently with the Court of Justice case law.
• TUPE's text implements the Directive and does not secretly extend the meaning of "economic activity"; any broader protective measures are provided elsewhere in domestic legislation and do not affect regulation 3(1)(a).
• The ET made permissible factual findings that Organization A principally commissioned services and that its ancillary activities did not amount to providing goods or services on a market.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began from the text of Directive 2001/23/EC and the implementing regulation (TUPE regulation 3), and reviewed the relevant case law in competition and transfer contexts. It accepted that the term "undertaking" and the concept of "economic activity" have been developed principally in competition law and that the same definitions have been applied in transfer law. The court considered FENIN and the CFI reasoning that purchasing/commissioning activity must be assessed by reference to the subsequent use of purchased goods and services, and that the characteristic feature of economic activity is the offering of goods or services on a market.

The court held it would be incoherent to apply different principles to the definition of "economic activity" in competition cases and in TUPE/transfer cases and accepted Nicholls as correctly applying those principles in the TUPE context. It rejected the Appellant's submission that FENIN supports treating commissioning connected to a market as itself economic activity, and rejected the alternative that FENIN is wrongly to be treated as inapplicable in employment cases. The court concluded that, on the ET's factual findings (that Organization A principally commissioned services and did not supply services on a market), regulation 3(5) applied and Organization A was not an economic entity for TUPE purposes. The court also held that the ET was not required to apply an additional exhaustive inquiry into public functions once it had concluded there was no economic activity in the circumstances of this case. Finally, it held that the ET's factual findings about ancillary functions were permissible and dispositive.

Holding and Implications

APPEAL DISMISSED

Holding: The Court dismissed the appeal and upheld the Employment Tribunal's approach and findings. The court held there was no material error of law in the ET's reasoning; it was correct to apply the established competition-law-derived definition of "economic activity" when assessing the application of TUPE, and to conclude that Organization A's central commissioning role did not amount to an economic entity under regulation 3.

Implications: The direct effect is that the ET's findings and orders stand and the Appellant's appeal is unsuccessful. The court reaffirmed that the established case law on "economic activity" (as developed in competition cases and applied in transfer cases) governs the TUPE gateway; it declined to broaden the meaning of "economic activity" in TUPE on purposive grounds. The judgment does not establish a novel legal test beyond the authorities it applied and therefore does not purport to create a new precedent departing from the cited case law.

Note: All personal names and organisational identifiers in this summary have been anonymised in accordance with the specified instructions. Precedent names and legal citations are reproduced exactly as they appear in the provided opinion.