E.U. Labor Law Rankles U.S. Execs

A labor law that’s roiling the U.K. ad market also is raising eyebrows in the U.S., where agency leaders see no merit in its mandate that agencies winning new business hire staffers from the losing shop if they worked “wholly or predominantly” on the account.

“Everybody loses,” said Carisa Bianchi, president of TBWA\Chiat\Day in Playa del Rey, Calif. “The larger the account, the less inclined you would be to pitch it. Because of the economic impact and the [salary] disclosure effect, you’d lose. It could even be a competitive strike, with the potential for devious behavior and malicious intent. [The British government has] to wake up and smell the coffee and stop drinking tea.”

“This has as much chance of being applied here as my flying to the moon,” said Ian McGregor, gm of McCann Erickson in Los Angeles. “It contradicts American business practices on so many levels it sounds absurd to us.”

The European Union law, known as the Transfer of Undertakings Protection of Employment, is a 25-year-old statute. It took effect in the U.K. in April after the British government revised it to apply to all industries, including advertising and marketing services. The application is now being tested by Reckitt-Benckiser’s June decision to consolidate global creative duties on its $600 million account at Havas’ Euro RSCG—a move involving the shifting of business from other shops.

“It doesn’t seem to me that it’s in the interests of our clients or our business,” BBDO worldwide CEO Andrew Robertson said of the TUPE law. “If clients wanted to carry on working with [former staffers], they wouldn’t move the business. Even if the law has the right intentions, it’s going to have the wrong consequences.”

Lowe worldwide CEO Stephen Gatfield added that TUPE is “burdensome” and “quite complicated.”

While no such law exists in the U.S., it’s not unusual for agencies taking business from a rival to poach talent from the previous shop. At times the client requests such staff migration.

Publicis Groupe’s Saatchi & Saatchi, for example, is said to be looking to hire select account management executives from Omnicom Group’s DDB as J.C. Penney shifts creative duties on its estimated $400 million account from DDB in Chicago to Saatchi in New York. The hand-off will be completed next month. Saatchi declined comment, but sources said that the shop may hire some “mid-level account people” from DDB to work on Penney.

“Sometimes when you win new business, you want to recruit someone who knows the client’s business because of the learning curve—but key people, not the lot,” Bianchi said. “Usually you have resources you’d like to put on the new business. This [TUPE] law requires you to disclose proprietary business [information] and take on people in many instances you have no need for.” At the time of a business shift, the law requires that the losing agency disclose the salaries and benefits of staffers that are eligible to follow.

That said, not every account shift is driven by a client’s desire for change. In fact, sometimes marketers want to reconnect with creative or account leaders after they’ve left for other shops, such as in 2001 when Heineken shifted its $50 million U.S. account from Lowe to D’Arcy Masius Benton & Bowles, where former Lowe CCO Lee Garfinkel had landed, or the March exit of Tesco from Lowe in London. Tesco shifted its $80 million U.K. account to Frank Lowe startup The Red Brick Road, after longtime Tesco account chief Paul Weinberger became a partner at the new shop.

In the case of Reckitt, some of the business came out of McCann, and a global brand director and three group account directors who worked on Reckitt brands there now are seeking employment at Euro RSCG. The latter agency, however, has balked, prompting the staffers to file a claim with the U.K.’s Employment Tribunal. If a judge rules on the claim, advertising’s application of the law may change. The parties, however, expect the dispute to be settled out of court, which would prevent a judge from weighing in.

Meanwhile, the U.K.’s leading agency trade organization, the Institute for Practitioners in Advertising, has drafted a set of recommended guidelines for meeting the law’s standards and held a “town hall” meeting in London last week to get input from some 200 agency and client executives. Among the clients represented were Coca-Cola, Unilever, Kimberly-Clark, HSBC, Nokia, Land Rover and Jaguar, and the agencies included media players such as Starcom and MindShare. The IPA will incorporate suggestions from the powwow in a final draft that its council will likely adopt next month, said Chris Hackford, senior legal manager at the IPA.—