Close-Up: Live Issue - How agencies can be forced to hire rivals' staff

The introduction of TUPE Regulations in April could have massive implications for the ad industry, Noel Bussey writes.

From 6 April, advertising will face a development in employment policy that could drastically affect how big accounts are run and expose agencies to huge financial and legal risks.

The introduction of the Transfer of Undertakings (Protection of Employment) - TUPE - Regulations 2006 will mean any agency winning a piece of business run by an account team that works dedicatedly or predominantly on it will be obliged to employ all members of that team from the incumbent agency, should they decide they wish to move with the business.

Staff can choose to opt out of TUPE regulations and refuse to move with the account, but only if they terminate their contract and their agency rehires them. How-ever, this will result in the loss of any employment protection rights or long-service privileges.

The IPA has been fighting the legislation, and believes it will have negative implications for agencies and clients and for the employees it has been introduced to protect. "The truly shocking development is that if a staff member has a liability against their existing agency, for example a sexual discrimination case, the new agency becomes liable for the complaint," Mary Budd, the IPA's employment specialist, warns.

This is exacerbated by a stipulation in the legislation stating that an agency is not entitled to obtain any information about the new account team it is hiring until two weeks before the handover date.

"If an employee is filing legal action against their employer, the new agency won't have time to find out about it.

"The legislation may also stop smaller agencies pitching for big accounts because they may not be able to afford the staff if they win the business," Budd adds.

However, a spokesman for the Department for Trade and Industry counters: "The regulations should encourage individuals to work for the smaller agency on what might otherwise have been a risky short-term assignment."

The IPA has been attempting to inform its members of the potential problems and pitfalls.

Debbie Morrison, the director of membership services at ISBA, has been preparing for the legislation for six months. She says: "If we see more than one or two cases a year I'd be very surprised. The situation is very complex, and for it not to apply is in everyone's interest, but most clients have TUPE clauses in their contracts already."

Despite the disagreement about the possible long-term effects, there is a consensus that the legislation is unclear, complex and "idiotic".

There is no definition of what "predominantly" means when applied to share of time spent on a particular account; nor will there be one until a test case has been heard.

Morrison says: "It's a general legislation being applied to a specialist industry."

James Murphy, the chief executive of Rainey Kelly Campbell Roalfe/Y&R, adds: "The whole legislation is counter-intuitive to an industry that runs on competition. An account generally moves because the client doesn't want to work with that team anymore."

The legislation was originally drafted in 1981 and was designed to protect the employment rights of workers in companies that were being acquired, such as cleaning or food contractors.

The IPA, along with representatives from other professional industries, unsuccessfully attempted to lobby the DTI to include an exemption for professional services.

A DTI spokesman says it is more important to attempt to guarantee the safety of the employee: "Should employees work predominantly for one client, then the regulations would provide them with necessary protection in the event of the contract being lost."

Cases where TUPE has been cited in advertising are rare, but there have been examples of workers attempting to use the guidelines to secure employment following an account move. Last year, Delaney Lund Knox Warren & Partners won Vauxhall's retail ad account from the specialist agency Broadway. The car-maker was the agency's only account and Broadway closed once it moved.

Once the Broadway staff realised this was going to happen, they turned up at DLKW's offices in the hope that they would be given jobs on the account.

"At one point we had 36 people in the office wanting us to take them on. But there was no way we could have afforded them," Mark Lund, the DLKW group chief executive, says. "One of the reasons we won the account was because we devised a much more cost-effective way of running it ... because it was not law then, we didn't have to take them on.

"This legislation is going to take a lot of people by surprise. A lot of the industry just doesn't realise how this change will affect their businesses."

However, many of the potential pitfalls can be avoided from the outset if agencies and clients draw up contracts that can be applied in any circumstance.

"The IPA will have to create some standard wording and clients will have to be complicit because it's going to affect everyone," Lund says. "We need to create some form of mirror indemnity where everyone is covered and it doesn't lead to big legal battles or bad feelings."

- Leader, page 22.


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