Strong relationships between the service provider and the client are critical to successful client service. What happens when that relationship goes sour? A case in the sphere of professional services has the potential, in some instances at least, to make the client-relationship a matter for the employment tribunal.
Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), a person's employment is protected when the provision of a service changes hands. Employment with the new provider is treated as continuous with the employment of the previous provider.
Attention was focussed on the application of TUPE to professional services by its proposed exclusion from new legislation on service provision changes in 2006. This new legislation made it easier for a change in service provider to amount to a TUPE transfer.
The proposed exclusion of professional services was well publicised. However, the Government's decision not to implement the proposed exclusion was not so well publicised.
In the employment tribunal case of Hunt v Storm Communications Limited and Others ET/2702546/06, Hunt, a consultant at a public relations agency, was assigned to a client, and when her employer lost the client's work, she successfully argued that under TUPE her employment should have transferred to the client's new agency.
Clients would expect firms to absorb any TUPE risk. This is likely to be accepted by firms because it will be limited to high-value clients and judged to be a risk worth taking.
In any event, the risk can be minimised. The most common rule of thumb for TUPE to apply remains the proportion of time spent on the particular activity, although other factors may be relevant too. In the Hunt v Storm case the employee spent about 70 per cent of her time on the client's work. By having a team of employees servicing the client the TUPE risk is reduced, although clearly relationships are key and clients often prefer consistency.
Workloads also fluctuate. One month someone may spend more than 50 per cent of their time working with a particular client; the next it could be 10 per cent. TUPE states that any assignment must be "other than on a temporary basis", and it would be fair to say that many client assignments are transient and variable.
In any event, arguing the application of TUPE is likely to be viewed as bad form commercially, and is unlikely to serve the firm's reputation well with the outgoing client and others who observe the market.
Employees themselves may argue the application of TUPE even if their employers do not, although few professionals would relish a move to a new employer that did not expect or necessarily want them.
Nevertheless, professional services firms should be aware of the possible application of TUPE on winning or losing client work. The same applies to other professional services employers; case law developments will be keenly watched in future.
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.
