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Packaging Design IPA Jim Smith

TUPE: Lost in translation

By The Drum | Administrator

February 22, 2008 | 5 min read

A storm has been building around new employment laws

Hard cases make for bad law, and the statute books are filled with complicated rules intended to make life easier, but which often have precisely the opposite effect. The TUPE provisions are a case in point; essentially a good idea with its heart in the right place, but somehow creating new problems equally as bad as those the law was designed to counter.

Jim Smith, MD of Clear Marketing in Manchester, who acquired the Cala homes account from Glasgow-based agency Red Cell – which has since closed – recently experienced a TUPE transfer which demonstrates the impracticalities an agency can face when they win business from an incumbent agency.

“Nobody believes you when you say that if you win a piece of business, the people who formerly worked on that business – if they qualify – can transfer,” he says.

“We won a piece of business in Scotland. According to the incumbent agency, there were nine people who worked on that business. The agency applied TUPE, and submitted the names of the people eligible for transfer, which included the MD. It’s insane.”

Cala declined to comment on how TUPE was applied in this case, an example of the practical realities of the new law.

Last month the IPA publicly called for marketing agencies to be exempt from the provisions, although a recent announcement from the department for Business Enterprise and Regulatory Reform (BERR – sadly, employment law is replete with unavoidable acronyms) suggests that as the new laws are still so fresh that a review is not appropriate.

Many companies anecdotally are struggling to comply with the law’s requirement that staff working on a contract must be retained by the client when the contract is passed on, a proposition fundamentally anathematic to the culture of the marcomms industry.

However, the recently settled ‘Hunt’ case shows that this problem is immediate, and impacting on the industry now. The storm has well and truly arrived, and the case illustrates the difficulties that caused the IPA to speak out in favour of an industry wide exemption.

The Hunt case found an account manager, a Mrs Hunt, could proceed with a claim that she had been unfairly dismissed, when her clients re-tendered their PR contract to another firm.

Hunt worked for Storm Communications, working principally on the firm’s Brown Brother’s PR account, which took up around 70 per cent of her annual work time. Then, the business was won by rival PR agency Wild Card, which was found to constitute a ‘relevant transfer’ under the law.

Unfairly dismissed

The long heralded Transfer of Undertakings Protection of Employment regulations (to give TUPE its full title) came into force in April 2006. Essentially intended as a fairly routine piece of employee protection law it is doubtful the government seriously expected it to cause anyone undue concern.

TUPE was principally intended to protect staff – usually labour only subcontractors in the service industry – from being unfairly dismissed. As a form of standard employment protection, the principle is hard to disagree with, and in labour only services, it seems logical, workable and practical.

TUPE was, as one MD put it, originally designed to protect workers in a manufacturing plant in Manchester, which the owners wanted to move to Dusseldorf. Clearly, in the marketing arena where the specific personal qualities and distinctive attributes of the company, its people and its ethos are crucial factors in winning a contract, this is beyond impractical. The nature of the relationships are reversed; removal of key personnel is one of the desired effects of awarding the contract elsewhere.

The Hunt case turned on whether there was an obligation in her contract of employment to work on that account, and it was decided that there was, which meant she was entitled to raise an unfair dismissal claim by not being transferred together with the business.

It is significant as it is believed to be the first to go before a tribunal, and is likely to set a precedent in future disputes.

The decision is currently subject to appeal, and a reversal is likely to be hoped for with crossed fingers and baited breath amongst the creative industries.

Last month, at an IPA Conference, the Rt Hon Peter Luff, who chairs the influential cross party Enterprise and Regulatory Reform Select Committee, called for an industry-wide exemption from the TUPE provisions, which he said had a “seriously adverse impact”.

“These regulations are a very real threat and an unnecessary burden to the creative industries, with no benefit to anyone, least of all employees who end up at a disadvantage” he said.

Clear’s Smith wholeheartedly agrees.

“My experience was a bad one,” he says. “We had to make five people redundant, transfer over three, who now work for us, at significant cost. The big issue is that the client doesn’t understand why it costs them money for us to acquire their business. The client is not happy, and the employees lose out. It is happening a lot, and it tends to be on the big pieces of business. The level of awareness of this issue, from agencies and amongst clients, is very, very low.”

Packaging Design IPA Jim Smith

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