Fragmentation of activity may preclude service provision change
06 September 2018
The Employment Appeal Tribunal (“EAT”) has confirmed that when considering whether or not there has been a TUPE service provision change (“SPC”), it is critical to identify the relevant activity. The analysis must be done in the right order and any fragmentation should be considered when considering if activities carried on by the subsequent service provider are fundamentally the same as those carried on by the outgoing service provider.
Facts of the case
Ms Henry and 16 colleagues were employed by Sevacare (UK) Ltd, providing support and care for 168 adults within their homes. Sevacare provided the care services under a contract with Haringey Council, and tried to ensure that the same care assistant would provide the care on each visit to ensure continuity and a relationship of trust. A regionalised approach was adopted, so that wherever possible carers worked within one zone and were allocated clients within that zone.
In 2016, Sevacare gave one month’s notice that it would be terminating the care service being provided. The Council decided to transfer the service to four new residential care providers, allocating between them based on capacity of the new providers and postcodes.
In some cases all of a care assistant’s work went to the same provider, but in others an assistant’s work was split between several providers. The question arose as to whether some of the care assistants would transfer under TUPE - and to whom - in circumstances where their work had been fragmented between multiple new providers.
At a preliminary hearing, an Employment Tribunal (“ET”) found there had been an SPC from Sevacare to one or more of eight respondents. Although the ET’s conclusions were somewhat unclear, the EAT believed that its findings were as follows:
- There had been an SPC from Sevacare to one or more of the new providers.
- The “client” was the Council, not the recipients of the care.
- The “activity” was the package of homecare services being provided to the individual recipients of the care.
- The activities remained fundamentally the same after the transfer.
- There was an organised grouping of employees because the principal purpose of the activity was delivering care to service-users for whom the Council was responsible.
The ET rejected the contention that there had been fragmentation, and it did not appear to have considered the question at all until it came to consider the issue of whether there was an organised grouping of employees.
Two of the new providers appealed, arguing that the fragmentation that had occurred in practice meant there had been no SPC and no TUPE transfer.
The EAT’s decision
The EAT held that the ET’s reasoning had been flawed in various ways. While it was true that care was still being provided to the same recipients, there had been disagreement over what the relevant activity was for TUPE purposes. The ET had not clearly identified whether the activity was the whole service for the Council or a subset of that service.
As no single provider took on the majority of the work, the EAT said it was difficult to identify a natural destination for a number of employees given that the people they had been caring for went to different providers. The EAT considered that the ET should have considered fragmentation earlier, when considering whether the activities performed before and after the transfer were fundamentally the same.
The EAT also criticised the ET for reaching a conclusion about the purpose of the organised grouping, without first considering whether such a grouping existed and had been deliberately or consciously formed. The case was sent back to a different tribunal for reconsideration.
The EAT’s judgment provides a useful reminder that there is a distinct order in the steps that need to be followed to establish whether there is an SPC, and “fragmentation” is quite an early consideration:
- Step 1:Identify the activities that the original provider is carrying out.
- Step 2:Decide whether the activities carried on by the subsequent provider are fundamentally or essentially the same as those carried on by the original provider. Fragmentation between different providers may mean the transfer is not an SPC.
- Step 3: Identify whether there is an organised grouping of employees in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client. Was the grouping intentionally formed for that purpose?
- Step 4: Check that the activities are not: being carried out in connection with a single event of short term duration; or wholly or mainly the supply of goods (rather than services) for the client’s use.
So crucially, the question of whether a service has become too fragmented as a result of passing to multiple service providers is an early part of the analysis, forming part of the question of whether the activities are the same before and after transfer. The later questions do not need to be examined if failure at an earlier stage has meant that an SPC can be ruled out.
London Care Ltd v Henry and others – judgment available here