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Service fragmentation
[ch 12: pages 362-263]TUPE can apply when a service is retendered among several new providers instead of just one. The transferring employees should be matched up to each new service provider based on an examination of the activities pre- and post-transfer. This is usually worked out 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.
So far, so good. However, taking this a step further, a particular unforeseen problem has developed where the 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 described in TUPE case law as “service fragmentation”.
This is exactly what happened in the Legal Services Commission outsourcing case which 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, 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 answer might have been reached.
Thomas-James v Cornwall County Council, unreported ET1701021-22
It is important not to overstate the significance of “service fragmentation” as a means of enabling employers to avoid TUPE. Typically, “service 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 reallocated, 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 do not follow this model.