Agencies take a casual approach to new EU employment law

When Delaney Lund Knox Warren & Partners entered a legal battle with rival Broadway (formerly part of Interpublic Group) over UK employment law two years ago, the row hardly made a noise in the creative industry. DLKW had snatched Vauxhall’s dealership advertising business from Broadway, which attempted to use Transfer of Undertakings Protection of Employment (TUPE) regulations to force DLKW to take on its staff who had worked on the business.

DLKW won the case, but had Broadway succeeded it would have avoided making any redundancy payments following the loss of the &£15m account. Invoking TUPE would have meant the winning agency being forced to take any excess employees from its defeated rival.

Now that the latest iteration of TUPE has been approved by the European Parliament, the above scenario is more conceivable. According to the Institute of Practitioners in Advertising (IPA), the new EU legislation will expose agencies to a potentially huge financial risk when seizing new accounts. The law, introduced on April 6, is likely to herald significant changes to the way in which accounts are handled.

The IPA recommends that agencies abolish dedicated account teams altogether, thereby falling outside the scope of TUPE (MW last week). But one advertising expert warns this tactic is “ludicrous” and “sensationalist”. She adds: “TUPE will be commercially unrealistic when applied to our business, because even the clients want dedicated teams to work on their businesses. This whole thing will work only in theory.”

IPA legal director Marina Palomba explains TUPE could mean clients entering into longer relationships with their agencies. She says: “That would be a good thing for both advertisers and their agencies – but only if these changes do not lead to advertisers insisting on contracts designed to get around the law, leaving agencies uncertain about who will be liable for the costs associated with the transfer of staff.”

Advertising agencies refuse to panic. One agency insider says: “This is all humbug. It’s another bit of EU nonsense that the creative industry is unlikely to take much notice of.”

TUPE regulations were first drafted in 1981 to protect employment rights during a takeover. The old legislation was interpreted as protecting employees who were engaged in an outsourced business upon a subsequent change of contractor. Most of the cases that went before the European and UK courts related to blue-collar workers, rather than agencies or businesses providing professional services. However, TUPE 2006 takes the view that all employees, irrespective of profession or qualifications, are entitled to this protection.

Gary Birtles, managing director of Initiative, which handles media buying and planning for Vauxhall dealerships, experienced TUPE during the DLKW/Broadway legal wrangle. He says that in order to avoid a case of 20 people knocking on an agency’s door demanding employment, advertisers will need to put indemnity clauses in agency contracts. “The agencies will also need to have some sort of indemnity against winning,” he adds.

The Incorporated Society of British Advertisers says it has already issued guidance to its members to talk to agencies and agree in principle “not to apply” TUPE. The regulations apply only to staff assigned to work on a particular account on a full-time basis. Highlighting the complexities of this tedious employment law, ISBA client services director Debbie Morrison asks: “What represents ‘dedicated time’? It could be anything from 60% to 100%.”

This legislation, like any other, might just be another laborious labyrinth, and seems unlikely to either put agencies off pitching for new business, or count the cost of winning.

Sonoo Singh