Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
My company is looking into setting up a multi-jurisdictional operation but may have to restructure its European presence in doing so. What should we look out for?
In the current economic climate, one trend we are seeing is companies selling part of their business as a way to restructure on a global scale and focus on their core business lines. However, these carve out sales which involve only part of the workforce can be complicated from an employment perspective, especially in Europe and other countries which have laws that mandate who must transfer.
Today I will share with you a few top tips if you are involved in transferring employees as part of multi-jurisdictional deal.
- Confirm your “in scope” jurisdictions and identify which are your priorities. This may be on the basis of which have the largest head count, the business lead in time to the proposed transfer date or the complexity of employee information and consultation procedures. But understanding which jurisdictions have a key business focus or complex legal issues is essential to delivering a timely employee transfer.
- Understand the method by which the employees will transfer to the buyer. Whereas in America and many parts of Asia, employees will need to be offered new employment by the Buyer. In most European countries and some South American countries, employees will automatically transfer with the business when it is sold and have rights associated with this automatic transfer like the right to be employed on the same terms and conditions and not be dismissed because of their transfer of employment.
- Set perimeters on how to determine which employees are assigned to the business being sold. In some instances, it will be clear which employees are working for the business and should transfer but employees who work in divisions like finance or HR might work for many business lines, and it may not be immediately clear if they should transfer with the business. In Europe there are principles to determine who should transfer and employers are unable legally to cherry pick employees to transfer.
- Get to grips with what consultations need to take place, when they must start, how long they take and who must be consulted. In Europe, it is common to have bodies such as unions and works councils who need to informed or consulted about a business sale and having a good communications plan is critical to a successful employee transfer. In some cases they must start before the deal has signed and there may be criminal penalties for non-compliance.
- And finally, don’t forget about practical issues of transferring employees as part of a sale such as ensuring payroll is ready, employee benefits are set up and any immigration approvals are obtained. Here working with an employer of record or entering into some form of transitional services agreement can be a practical solution.
I hope you found this helpful; and we would love to help you with your next corporate transaction or restructure.