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Service fragmentation
[ch 12: pages 421-422]TUPE can still apply even though, when a service contract is retendered, the client decides to split up services that were previously provided under one contract and instead to divide them between several different providers. Where this happens, the transferring employees should be matched to each new service provider, based on an examination of the activities pre- and post-transfer. This is usually worked out by looking at 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.
Sometimes activities after a transfer are distributed so widely, and in such a fragmented way, among so many different new service providers, that it is impossible to say which of the new service providers should take responsibility for which member of staff (Clearsprings Management Limited v Ankers [2009] UKEAT/0054/08/LA). This problem is known in TUPE case law as “service fragmentation”.
This is what happened in this Legal Services Commission outsourcing case, which is a good illustration of the problem:
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, a body previously in charge of administering legal aid. It employed a dedicated team to provide this service. The Legal Services Commission used a call-routing system, under which calls from the public were routed to the next available adviser, who, in practice, could work for any one of the 17 service providers. In the retendering exercise, that number was cut to nine and the council lost its contract.
The tribunal decided that even though there was clearly an organised grouping of council employees dedicated to providing the service before the transfer, it was impossible to match 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 conclusion might have been reached.
Thomas-James v Cornwall County Council, unreported ET1701021-22
It is important not to overstate the significance of “service fragmentation”, since it should typically only occur in a few cases – where a contracted service is split up across a large and diffuse number of service providers, as in the Legal Services Commission example. Most changes of service provider do not follow this model.