UK: TUPE Protection For PR Provider

Last Updated: 3 August 2007
Article by Christina Tolvas-Vincent, Alison Bell and Nikki Duncan

This article is the copyright of Bond Pearce LLP, July 2007.

The Transfer of Undertakings (Protection of Employment) Regulations (TUPE) have been with us for over a quarter of a century having brought into force the European Acquired Rights Directive (ARD). The version enacted in 2006 was intended to clarify the myriad of issues that had been thrown up over the years. Ever loyal to its troublesome history, however, TUPE 2006 continues to raise questions and this week we consider an Employment Tribunal's decision in Hunt v (1) Storm Communications Ltd (2) Wild Card Public Relations Ltd and (3) Brown Brothers Wines (Europe) Ltd that a professional service employee transferred under TUPE 2006 to a new firm when a client account that she worked on was taken over by a new provider. This decision has significant consequences for both service providers and those who employ them.

One of the (many) contentious features of TUPE 1981 was whether or not it covered the contracting out of services, particularly when they were taken back in-house or changed to another service provider. TUPE 2006 sought to clarify the position by introducing a regulation which specifically addressed the provision of services. In doing so, the government acknowledged that this extended the protection of TUPE beyond that intended by the ARD.

As well as applying to the by now familiar scenario of when there is a transfer of whole or part of a business or undertaking (business transfer), TUPE 2006 also applies to a "Service Provision Change". This is defined as where a client engages a contractor to carry out "activities" on its behalf and reassigns such a contract to a new contractor or brings the work back 'in-house'.

For a service provider change to be a relevant transfer however additional conditions must be met. They are that: immediately before the change there should be an organised grouping of employees (which can be a single employee) which has as its principal purpose the carrying out of the activities concerned on behalf of the client and that the client intends that the activities will, following the service provision change, be carried out by the new provider.

Facts

Brown Brothers Wines (Europe) Ltd (Brown) engaged Storm Communications Ltd (Storm) to provide PR services. Ms Hunt was employed by Storm as an Account Manager but her job description did not contain details of the specific clients she would be working for. However, Ms Hunt spent most of her time on the Brown account beginning the day she arrived at Storm and was involved in its day to day management.

Each client had an Account Director, an Account Manager (Ms Hunt) and an Account Executive. The Account Director for the Brown account left Storm to set up her own business but remained the Brown Account Director as a consultant for Storm. This departure led to an increase in Ms Hunt's responsibilities in relation to the account.

In June 2006 Brown notified Storm that they would be re-tendering the PR contract and that as from 28 July 2006 Storm was to stop work and the new contract would start on 1 September. Storm pitched for the contract but was unsuccessful and the contract was awarded to Wild Card Public Relations Ltd (Wild).

Storm's Managing Director spoke to Ms Hunt and said that he believed that Ms Hunt should transfer to Wild under TUPE 2006 but that this had not been discussed or agreed. On 1 September Ms Hunt was told that Storm had not heard from Wild but that she would be given temporary assignments until matters were resolved.

Wild's solicitors were provided with the statutory information required under TUPE 2006 including details of the time Ms Hunt spent on the Brown account. They argued that TUPE 2006 did not apply as she was not 'essentially dedicated' to the account as she worked less than 55% of her time on it and carried out other duties. The contract with Wild was delayed until 2 October and, until then, Brown was responsible for its PR work in-house.

Ms Hunt subsequently made an unfair dismissal claim against Brown, Storm and Wild.

Tribunal Decision

The Tribunal agreed with Wild and Brown that the transfer of an entity/organised grouping could be both a business transfer and a service provision change. It therefore had to consider both provisions.

The Tribunal held that there was no business transfer as there was no economic entity prior to the contract being awarded to Wild which retained its identity after the contract went to Wild. Instead, Storm had provided an activity to Brown within its own organised grouping of employees.

The Tribunal then went to consider whether there was a service provision change which would engage TUPE 2006.

First the Tribunal concluded that the provision of the PR services was an activity which was first carried out by Storm and was subsequently carried out by Wild. However, the Tribunal did not consider that Brown had taken the PR services in-house prior to them being carried out by Wild as they would have been unable to do so. Consequently, there was no service provision change to Brown ie the activities were not taken in-house. There was, however, a service provision change to Wild.

The Tribunal then had to consider whether or not the additional conditions were met in order for there to be a relevant transfer.

Was there an organised grouping of employees?

The Tribunal found that there was as the Account Director was not an employee but a consultant and the Account Executive was not engaged in the provision of the PR services. The organised grouping was therefore Ms Hunt.

Did the organised grouping have Brown's account as its principal purpose?

Wild asserted Ms Hunt only spent 52% of her time on the Brown account and worked on other accounts. This was rejected by the Tribunal who found that in fact it was nearly 70% of her time and therefore the bulk of her work was for Brown.

Did the client intend that the service would be provided by the new provider?

Despite the fact that Brown temporarily dealt with PR queries prior to Wild's contract beginning, the Tribunal found that it was always the intention for Wild to carry out the PR role after Storm's contract had been terminated.

Taking all these factors into account, there was a relevant service provision change and Ms Hunt transferred to Wild. The date of the transfer was found to be when Storm's contract was terminated in July and not when Wild's contract began in October.

Conclusion

This case is only a Tribunal decision and therefore it is not binding. It is, however, the first indication of how tribunals will approach changes to service providers and, if followed by other tribunals, it demonstrates the potentially wide ramifications of the new provisions in TUPE 2006.

When the Regulations were being developed it was proposed that the service provider change would not apply to changes in professional services, however, this was dropped from the final Regulations. TUPE could therefore apply whenever a client changed lawyers, accountants and other professional providers.

What was significant here was the amount of time Ms Hunt spent on the account in comparison with her other work and it would seem that the tribunals will take the same approach to this as they would under the more familiar business transfer provisions when an employee does not wholly work for the entity transferred. Businesses who do not want to see their employees transferred when a contract is lost should ensure that they are not part of an organised grouping which is substantially engaged in the provision of services to one client.

For further information go to www.bondpearce.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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