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What is service fragmentation?
[ch 2: page 23]“Service fragmentation” is the term used to describe what happens when redistributed services are so fragmented among different providers that it is no longer possible for any employee to demonstrate that their employment, and associated employment liabilities, have transferred to any particular new employer. Employers argue that, on this basis, TUPE does not apply. 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 problems caused by this issue:
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 (LSC). It employed a dedicated team to provide this service. The LSC 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 LSC’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
Although service fragmentation certainly affects some transfers, it is important not to over-emphasise its importance as a means for employers to escape TUPE, because this issue is likely to affect only a narrow group of businesses, for example, some call centre models, where a service is provided by multiple different providers, and is re-tendered across a new and diffuse group of service providers, as in the Legal Services Commission scenario above. Most service contracts do not follow this model.