Last month, I was invited by the AAR to present on an amended piece of employment legislation called TUPE - you may have heard people in the industry getting quite excited about it.
TUPE, the Transfer of Undertakings (Protection of Employment) Regulations 2006, is a 25-year-old law under which employees automatically transfer from one company to another when a business is sold. If you are in a communications agency, ignore this at your peril. As a result of changes earlier this year, you may find you have a different employer because your old agency lost an account; if you are the owner of an agency, you may find your best creative transferred to your rival without so much as a leaving do.
- In April 2006, a new category of TUPE transfers ("Service Provision Change") was introduced to protect employees when a service is outsourced, reassigned or contracted in. This may apply when a client moves its contract for creative services from one agency to another.
- To reduce the likelihood of TUPE applying when an account is lost, an agency should ensure neither employees nor teams work solely on one account, and no-one spends more than 50 per cent of their time working on any one account.
- TUPE is there to protect employees. It is the employee who claims under TUPE, not the agency.
- Under TUPE, employees dedicated to a lost account transfer to the new agency, whether or not the old or new agency wants this outcome.
- New business for agencies post TUPE 2006 may be a poisoned chalice. All rights and liabilities of the transferring staff move to the new agency. The employees cannot be dismissed (by either the old or new agencies) unless it is for an economic, technical or organisational reason (ETO) and their terms and conditions cannot be changed, even if they are better than the new agency's existing staff. If an employee has a claim against the old agency, for instance, for sexual harassment, the new agency will be liable, even if the harasser doesn't switch.
- Employees can opt out of a TUPE transfer, employers can't.
- Staff who do not opt out will be left to the mercy of the new agency, but the new agency cannot get rid of new staff without an ETO (ie. redundancy). If redundancies are needed, new staff will have to be treated the same as the new agency's existing staff.
- TUPE only applies to employees, not freelancers. Calling an employee a freelancer will not work.
- If an account is of a short-term duration, TUPE may not apply. But TUPE could still apply to rosters if there is an intention by the client to use agencies on an ongoing basis.
- Before taking on a new account, an agency could seek an indemnity from the client to cover liabilities, which it may inherit with the new account. The agency could also seek an indemnity for any future losses when the account is lost.
As an employee or employer, you cannot simply ignore TUPE, it will affect you and it is here to stay.
- Karen Tickner is a senior assistant in the Employment Group at Mishcon de Reya.