News Analysis: What you need to know about TUPE

Agencies must wake up to new employment law, warns David Hunt of PRWeek's legal adviser Farrer & Co.

On Thursday this week, the CIPR is to launch employment guidelines for the industry in the wake of new rules that it believes could have a ‘major impact’ on PR agencies that regularly have to pitch for business.

New Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) came into force on 6 April, following a DTI consultation. They replace regulations from 1981 and contain new provisions, including the introduction of ‘Service Provision Change’ transfers.

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We are unlikely to see any case law on the changes until the beginning of next year at the earliest – and it is difficult to know exactly how the new provisions will be interpreted by employment tribunals.

But the rules are already in force, and it is important for PR professionals to know how the provisions will affect their work. Contrary to what you might think, whether you are an agency MD, an employee or even a client, this really does matter.

Service Provision Change refers to when a service provided in-house is contracted out; where there is a change in the external service provider (such as when a PR agency loses an account to another agency); or when a service is taken in-house.

Crucially, immediately prior to the Service Provision Change, there must have been an organised grouping of employees (or indeed one employee) based in the UK whose principal purpose was carrying out that service on behalf of the client.

There is an exemption where the services are for a single event and are short term. However, while a one-off, four-week contract might fall within this exemption, an ongoing account will not.

When there is a Service Provision Change, and no exemption applies, the staff dedicated to the account will transfer to the new provider and bring with them their terms and conditions of employment. The new provider then steps into the shoes of the old provider as the employer, and takes on any outstanding claims and liabilities the staff bring with them.

The new provider cannot vary the transferring staff’s terms of employment simply to ensure they are consistent with those of its own employees. This means they could be taking on new employees on better benefits than enjoyed by their own staff.

The new provider also risks automatically unfairly dismissing the transferring employees should it dismiss them for a reason related to the transfer.

Below we look at three possible scenarios. Overall, agencies and clients that are aware of TUPE and discuss its ramifications openly with each other should have nothing to be afraid of.

David Hunt is a senior solicitor in the employment team at London law firm Farrer & Co. He advises and speaks on TUPE-related issues.

Do you have a question about TUPE? Email David Hunt will answer them in a future edition.

You are: the MD of a PR agency that has just lost a big account

WHAT COULD HAPPEN: If you had an organised team whose main purpose was carrying out work on the account, there is likely to be a Service Provision Change.

If TUPE applies, you will lose the employees dedicated to the account to the rival agency, unless they object to transferring. You will also be required to:

(a) inform and potentially consult the team in relation to the transfer; and
(b) provide prescriptive employee information to the rival 14 days ahead of the transfer.

If you fail to comply with (a), your agency and the rival agency will be jointly and severally liable for up to 13 weeks’ pay per employee. If you fail to comply with (b), the rival agency can claim compensation for any loss suffered, set at a minimum of £500 per employee.

You can have some influence over whether or not TUPE applies. Service Provision Change applies where the employees’ principal purpose is carrying out the work on the specific client account. There is therefore scope to seek to sidestep TUPE should you:

(a) employ different employees to work on specific accounts on an ad hoc basis, or
(b) ensure that employees working on the account spend similar amounts of time working on different accounts.

You are: the MD of a PR agency that has just won a big account

WHAT COULD HAPPEN: You could be lumbered with the losing agency’s team of employees. What’s more, they are likely to be the very employees the client was trying to get rid of in awarding you the account.

The transferring employees will retain their continuity of employment and terms and conditions of employment. You might therefore inherit a team on better pay and benefits than those of your own staff, and on longer notice periods.

If you dismiss ‘transferring staff’ with more than a year’s service, the dismissals are likely to be unfair. The employees could bring a tribunal claim against you for compensation of up to £67,100. There are limited exceptions where dismissals will not be unfair; for example, if it is a genuine redundancy situation. Even then, unless contracts between your agency and the client say otherwise, you will pay the related costs and may be faced with including your own staff in the selection process.

When tendering for accounts:

  • Be alive to TUPE 
  • Ask the client whether the existing agency had a dedicated team working on the account, and whether TUPE liabilities will arise
  • Factor extra costs into fee proposals

You are: a PR agency employee working on an account that is lost to a rival

WHAT COULD HAPPEN: If the account is the main account you work on (which could become a matter of dispute), you could find yourself transferring to the rival under TUPE.

If you do decide to join the rival agency, your employment, terms and conditions and continuity of service will be protected as set out above.

You can object to transferring, but this may not be particularly appealing.

If you do object, your employment will terminate – but you will not be deemed to have been dismissed by either your existing agency or the new agency.

As a result, unless your existing agency re-engages you – which it is not obliged to do – you will be left unemployed without any rights of action.

You may have rights if you object owing to proposed substantial changes in your working conditions or terms of employment.

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