The Government report into TUPE
For the advertising industry SPC rules fail to protect employees and cause considerable difficulties for both agencies and their clients. Now, after a Government report suggested repealing the rules, the IPA’s legal director, Richard Lindsay, explains the current state of play.
On 5th September, the Government published its report on its Consultation on the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), in which it had proposed repealing the service provision change (SPC) elements of TUPE that automatically transfer employees to a new employer under certain circumstances, most notably, when their existing employer loses a piece of business to another company.
The IPA, which has lobbied against the SPC rules since they came into force in 2006, responded to the Consultation and to the earlier Call for Evidence on behalf of its members, agreeing with the Government that the SPC rules should be repealed. They were intended to protect employees and to make it clearer when, in cases where services are: contracted in (brought back in house to the client); or outsourced from the client to a supplier; or re-tendered then assigned to a new supplier, those services would fall under the scope of TUPE.
Yet the SPC rules do not add clarity – far from it – and as far as the advertising industry is concerned, not only do they fail to protect employees, they also cause considerable difficulties for both agencies and their clients.
One obvious and direct effect of the SPCs is that, when a client decides to switch agency because, for example, it wants a fresh approach to its creative advertising, the same employees at the agency which loses the business may automatically transfer to the new agency. That causes those employees great anxiety and results in general uncertainty at the agency as to which employees will be included in the transfer and which will not.
It leads to disruption because the incumbent agency must administer the transfers – bearing in mind that only the largest have the internal resources to take on that administrative workload – and the new agency must make provision for taking on and, potentially, making redundant the new staff that it automatically inherits. And then most absurdly, following the example given above, the very reason that led the client to change agency in the first place – to find a fresh approach – is completely undermined.
It is because of the difficulties in implementing the SPCs that the IPA introduced its TUPE Protocol, in an attempt to assist agencies pitching for new business to ascertain what their potential liabilities might be if they win business and, potentially, inherit staff from the incumbent agency.
The Government itself was concerned that small and medium-sized businesses could be at a disadvantage when bidding for new business because the SPCs mean that they would have to take on the employment liabilities of the incumbent employer.
Consequently, the Consultation sought views on whether or not repealing SPC provisions would make it easier for business clients to change the provider of a service. The Government also acknowledged that the SPC rules gold plate the Acquired Rights Directive (ARD) from which TUPE derives, an unnecessary and unwelcome addition to the legislative burden on businesses.
So, the Government proposed removing the SPC rules altogether, not just because they gold plate the ARD, but because it recognised that there were problems with the operation of TUPE and it wanted to try to resolve them. The intended benefits of the SPC rules – clarity and certainty for employees and employers – were not being realised.
The result of the Consultation, as explained in the Government’s 61 page report, is extremely disappointing. The SPC rules will remain, despite the Government’s own misgivings and those of the IPA and other organisations.
Apparently, 67% of respondents to the Consultation were against the proposed repeal. Their main argument was that removing the SPC rules would create more legal uncertainty as to whether or not a transfer was caught by TUPE and employers and unions had become used to the provisions and had put processes in place to deal with them.
In addition to this, the Government also rejected calls for professional services or more specifically as requested by the IPA – advertising services – to be excluded from TUPE if it was decided not to repeal the SPC rules. The Government concluded that it would not be able to draft such an exception precisely enough.
So where are we now? The Government hopes to lay the new draft Regulations before Parliament in December and the Department for Business Innovation and Skills anticipates that the changes to TUPE are likely to come into force in January 2014.
Despite this and the Government’s pledge that the changes and additional guidance will deliver greater certainty, a number of areas of TUPE are bound to remain problematic.