Does TUPE apply when a free school is set up?

My colleague at Matrix, Claire Darwin, is an employment law specialist. She has very helpfully provided the following:

There are plenty of circumstances in which TUPE (the Transfer of Undertakings (Protection of Employment) Regulations 2006)  would apply to the opening of a free school – and indeed the Department of Education have recognised that TUPE will apply to the creation of academies (see here and here ).

It may also be of interest to note that intra-governmental transfers are covered by the Cabinet Office’s Statement of Practice regarding ‘Staff Transfers in the Public Sector’. Failure to comply with this guidance could be challenged on public law grounds.

Even if the transfer of staff is being effected under the School Organisation (Prescribed Alteration to Maintained Schools) (England) Regs 2007 ) this is unlikely to preclude TUPE from applying.

In brief, the effect of TUPE is to preserve employees’ rights when a business or undertaking, or part of a business or undertaking, transfers.  This means that employees’ retain all of their rights, including for example their continuous service. Further, that a dismissal because of a TUPE transfer is automatically unfair, unless it can be shown that there was an economic, technical or organisational reason entailing changes in the workforce (a so-called “ETO reason”). Establishing an ETO reason is difficult.

For TUPE to apply you need to establish that there was a relevant transfer within Regulation 3(1) of the Regulations. There are two types of relevant transfer: a transfer of an undertaking or business (or part of an undertaking or business) and a service provision change. The two types of transfers are not mutually exclusive, and a transfer of an undertaking may also be a service provision change.

Regulation 3(5) of the TUPE Regulations provides that “An administrative reorganisation of public administrative authorities or the transfer of administrative functions between public administrative authorities is not a relevant transfer”. However, the courts have construed “administrative functions” narrowly. In a very recent case, Scattolon v Ministero dell’Instruzione, dell’Universita e della Ricerca [2011] IRLR 1020, the CJEU held that TUPE applied to the transfer of a cleaner in an Italian State School from employment by the local authority to employment directly by the Italian state. The CJEU held that there was nothing to justify holding that public employees subject to a transfer to a new employer within the public administration should not be able to benefit from the protection of TUPE, merely because the transfer was within the context of a public administration reorganisation.

Transfer of an Undertaking

In order to establish that there has been a transfer of an undertaking, you need to examine the similarities and differences between the closing school and the free school/academy. The following would be particularly relevant in the schools context:

–        The identity of the students at the new school;

–        The curriculum and other activities offered by the two schools;

–        The additional services offered by the free school;

–        Whether the free school will use any of the same assets (eg books, furniture) as the closing school;

–        The name and image of the free school, and whether it capitalises on the reputation of the closing school;

–        The timing of the closure of the old school and the opening of the free school;

–        Whether any staff (academic or other) have transferred;

–        The location of the new school.

As a basic rule of thumb, if the free school/academy is in substance and form the old school – only located at new premises, then it’s very likely that a relevant transfer has occurred.  Equally, if the new school includes part of the old school such as an entire year group, then it’s likely that there has been a transfer of part of an undertaking or business.

The free school in Suffolk referred to in the question below may well amount to a transfer of part of an undertaking or business. In Askew v Governing Body of Clifton Middle School [1999] IRLR 708) the Court of Appeal (and EAT) accepted that there was an undertaking capable of being transferred when a middle school ceased to operate, and the schools were reorganised into primary and secondary schools.

Service Provision Changes

There are three types of service provision changes: outsourcing; insourcing, or bringing services back in house; and the change from one contractor to another. The third type of service provision change is most relevant here, the relevant statutory provision is:

Regulation 3(1)(b) (ii) activities cease to be carried out by a contractor on a client’s behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by another person (“a subsequent contractor”) on the client’s behalf;

Although it may seem strange to think of a local authority or a maintained school being a contractor, the courts are likely to construe the use of the word “contractor” in the Regulations broadly.  The courts have previously held that contractors providing services for asylum seekers on behalf of the Home Office fall within the Regulations (see Kimberley Group Housing Ltd v Hambley) so it is difficult to see why schools (whether maintained or free) providing services to students on behalf of the Department of Education would not also come within the Regulations.

In determining whether a service provision change has occurred, the courts will look at whether the activities carried out by the free school are fundamentally or essentially the same as those carried out by the old school. The answer to this question will be one of fact and degree, and the same factual matters listed above are likely to be relevant.

If, on the closure of the old school, the services it previously provided are divided between a large number of schools (a process which has become known as “fragmentation”), then this fragmentation may cause the transfer of services to new contractors to fall outside the scope of TUPE Regulations.

Unfortunately this is a complex legal issue, and you may be best to advised to obtain legal advice from a firm of solicitors specialising in employment law.  UNISON have produced some helpful guidance which is available here:

See also Claire’s comment on another post here.


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