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Service provision fragmentation
TUPE can apply when a service is re-tendered among several new providers instead of just one. Transferring employees should be matched up to each new service provider based on an examination of the activities pre- and post-transfer — usually on the basis of the percentage split of the activities shared between the different new providers (Kimberley Group Housing v Hambley [2008] IRLR 682). In practice, this exercise often has more to do with working out who should bear the financial cost of redundancies than about continuing any employment.
A particular unforeseen problem associated with TUPE is described in the cases as “service provision fragmentation”. This is what happens when the activities after the transfer are distributed so widely, and in such a fragmented way — among so many different new service providers — that it is no longer possible to tell which entity should take responsibility for which member of staff (Clearsprings Management Limited v Ankers ([2009] UKEAT/0054/08/LA)).
This is exactly what happened in the Legal Services Commission outsourcing case. Although only a first instance decision (and therefore not binding) it is a good illustration of the kinds of problem caused by “service fragmentation”:
The case concerned the allocation of legal services commission contracts. Cornwall County Council was one of 17 providers of free legal advice with a contract from the Legal Services Commission. It employed a dedicated team to provide this service. The legal services commission used a call-routing system which meant that calls from the public were routed to the next available adviser, who, in practice, could work for any one of the Commission’s 17 service providers. In the re-tendering exercise, that number was reduced to nine and the Council lost its contract.
The tribunal decided that even though there was an “organised grouping” of employees dedicated to providing the service before the transfer, it was impossible to match the specific functions carried out by the Council to specific functions carried out by any of the new contractors. The tribunal took into account the random allocation of calls between the 17 service providers and the fact that it was impossible to make a direct match between the percentage of service provided and the allocation of hours pre- and post transfer, as a result of the cut in the number of providers. The tribunal suggested that, if the activities had been defined alphabetically, by location, or in some other way, and then allocated to the new providers according to that definition, a different answer might have been reached.
Thomas-James v Cornwall County Council, unreported ET1701021-22
Typically, “fragmentation” is only a problem for a particular kind of service transfer — where the original contracted service was provided by a large number of different providers, and is re-allocated, after a tendering exercise, across a new large and diffuse group of service providers — as in the Legal Services Commission scenario. Most changes of service provider will not share these characteristics.