The new fit and proper persons regulation comes into effect today. Joanna Dirmikis and Neil Grant outline the regulation and some of its hotly debated elements.
Regulation 5 of the new Health and Social Care Act 2008 (Regulated Activities) Regulations 2014 creates a new requirement for NHS trusts and foundation trusts to ensure that all new directors and existing directors (executive and non-executive directors) are fit and proper persons.
‘The CQC guidance states that there is no time limit for considering serious misconduct’
Regulation 5 sets out detailed requirements which explain how to determine whether an individual reaches the fit and proper test requirements.
It applies to foundation trusts and trusts from today. Subject to parliamentary approval, it will be extended to other registered care providers from April 2015.
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Under the new regulations, NHS providers must not “appoint or have in place” a director unless they are:
- of good character - consideration must be given to previous convictions and removal from a professional register when assessing this;
- have the qualifications, competence, skills and experience necessary for their office; and
- be capable (once reasonable adjustments have been made) of performing tasks intrinsic to their job by reason of their health.
In addition, none of the requirements of schedule 4, part 1 must apply - this includes being declared bankrupt and being on the children’s or adults’ barred list maintained under the Safeguarding Vulnerable Groups Act 2006.
However, it is the new requirements under regulation 5(3)(d) that have been the subject of so much recent debate.
These make it clear that NHS providers must not “appoint or have in place” a director who has been responsible for, privy to, contributed to or facilitated any serious misconduct or mismanagement (whether unlawful or not) in the course of carrying on a regulated activity.
‘Regulations could be extended beyond trusts to other registered care providers’
There are some highly ambiguous terms in regulation 5(3)(d). Neither “serious misconduct” nor “mismanagement” are defined and terms like “responsible for”, “privy to”, “contributed to” or “facilitated” are both vague and potentially very wide ranging.
Rather unhelpfully, the guidance states that “serious misconduct and mismanagement means behaviour that would constitute a breach of any legislation or enactment which [the Care Quality Commission] deems relevant to meeting these regulations”.
In addition to this, the regulation is silent on the important issue of just how far back in time providers need to go to determine these issues. However, CQC guidance states that there is no time limit for considering serious misconduct or “responsibility for failure in a previous role”.
The CQC’s guidance, issued on 20 November, emphasises that it is for the chair of the trust to “discharge the requirement placed on the provider to ensure that all directors meet the fitness test and do not meet the ‘unfit’ criteria”.
However, in order to avoid breaching the regulation, trusts need to be able to demonstrate that their processes for determining whether a director is a fit and proper person are robust.
Examples of how to meet the requirements of regulation 5 according to CQC guidance include:
- providing evidence that appropriate systems and processes are in place to ensure that all new and existing directors are and continue to be fit;
- making every reasonable effort to assure yourself about an individual by all means available’
- making specified information about board directors available to the CQC;
- being aware of the relevant guidelines available, having implemented procedures in line with this best practice;
- informing relevant health and social care regulators if a board member no longer meets the fit and proper person requirement, and take action to ensure the post held by a person meeting the requirements;
- regularly reviewing a director’s fitness; and
- investigating any concerns about a person’s fitness and take timely and proportionate action.
Breaches of regulation
The guidance claims that the “CQC will not undertake a fit and proper persons test of a director or determine what is serious mismanagement or misconduct”, but “will examine how the provider has discharged its responsibility under the new regulation”.
However, it goes on to state that the “CQC will now be able to take enforcement action for breaches of the fit and proper person requirement”.
Three examples of how breaches of the regulation might be determined are:
- A director is unfit on a “mandatory” ground (for example, a relevant conviction or bankruptcy). However, the guidance makes it clear that if a provider considers a director to be fit despite a conviction or their removal from a professional health or social care regulator’s register, it must record the reasons for its decision and make the information about the decision available.
- A provider does not have a proper process in place to enable it to make the assessments required by fit and proper persons. The guidance makes it clear that the chair of the trust will have to sign a declaration to confirm that appropriate checks have been undertaken in respect of all directors. Inspections will also assess the efficacy of the provider’s processes under the “well led” question. This will involve checking personnel files and records about appraisal rates for directors.
- A decision is reached on the fitness of a director which is “not in the range of decisions that a reasonable person would make”.
The above examples make it very clear that there will be some circumstances where the CQC takes action because it is not confident in the decision reached by a trust.
The watchdog states that any action taken by them will be “proportionate to the concerns identified and the impact on people who use the services”.
‘It’s surprising the CQC says it’s not in the business of making judgements of individual directors’
It is somewhat surprising that a national regulator holding information about the compliance of NHS providers says that it is not in the business of making judgements about the fitness of individual directors.
The guidance in fact is contradictory as it states: “Where a director is associated with serious misconduct or responsibility for failure in a previous role, we will have regard to the seriousness of the failure, how it was managed, and the individual’s role in it.”
The reality is that the CQC will almost certainly be forced into forming a view about the fitness of individuals, even if only to refer it back to the trusts for review.
The guidance also deals with the situation of concerns being reported to them from the public or whistleblowers.
Where such information is received, the CQC will convene a panel led by the chief inspector of hospitals or a person designated by them to determine whether the information is significant and needs to be considered by the provider.
They will request the consent of the director concerned before passing on the information to the trust. If such consent is not granted the “CQC will consider whether to share the information, acting in accordance with the Data Protection Act”.
The response received from the trust will either satisfy the chief inspector that due process has been followed or lead to further dialogue with the provider, a follow up inspection or regulatory action using CQC enforcement policy.
‘Fit and proper persons regulations will apply to interim directors and governors as well as permanent directors’
The CQC will also be publishing what they consider to be “core public information sources about providers… which [it] believes are relevant for providers to use as part of their [fit and proper persons regulation] due diligence”. This includes information from public inquiry reports, serious case reviews and Ombudsman reports.
The guidance also makes an interesting point about special measures, namely that the CQC “will not use the fact that a provider is in special measures as evidence or an indication that a director is unfit”.
However, the guidance goes on to state: “We would, if necessary because of special measures, assess the effectiveness and robustness or the processes for the appointment of directors.”
No offence flows from breach of this requirement and there will be no “barring list” recording individuals who have been found to be unfit.
The CQC has said that the fit and proper persons regulation will apply to temporary, as well as permanent, director positions within NHS trusts and foundation trusts.
It will also apply to the governor(s) of an NHS foundation trust who sits on its board as a representative of the governors.
Providers may appeal to the first tier tribunal against a decision to take enforcement action. They may also challenge a decision by way of judicial review if the decision is unreasonable, irrational or unfair.
The current guidance suggests that for the most part, the CQC will be focussing on whether trusts have the correct processes in place for identifying whether the director satisfies fit and proper persons but that the actual job of removing a particular director will be the responsibility of the trust.
In addition to the possibility of having to face CQC enforcement action, trusts will need to be prepared for the possibility of an increase in claims against them by directors in the employment tribunal.
‘Trusts will need to be prepared for the possibility of increased claims against directors’
The CQC says it will be monitoring the early implementation of the requirement and publishing a report on it when a sufficient body of information is available.
The current guidance will also be updated when it is incorporated in CQC guidance on the fundamental standards, to be introduced from April 2015.
You should also look out for the joint document which the CQC, Monitor and the NHS Trust Development Authority will publish for chief executives and chairs. This is due to be published today.
Neil Grant is a partner of Ridouts and Joanna Dirmikis is a barrister for the firm