Employee Engagement
Obligation to Provide Information.
- EU Directive. Both the transferor and the transferee must provide representatives of their respective affected employees (or, in certain circumstances if there are no representatives, the employees themselves) with specified information about the transfer “in good time before the transfer is carried out” (i.e., prior to closing). EU Member States have interpreted this timing requirement in different ways. The information required to be provided is (i) the date or proposed date of the transfer, (ii) the reasons for the transfer, (iii) the “legal, economic and social implications” of the transfer for the employees, and (iv) any measures envisaged in relation to the employees. Generally, a “measure” may include limited changes or adjustments to terms and conditions of employment, changes to work locations or practices, redundancies or administrative changes such as changes to the date an employee is paid, but the determination of which actions may constitute a measure is EU Member State-specific.
- Belgium. Both the transferor and the transferee must provide representatives of their respective affected employees (or, in certain circumstances if there are no representatives, the employees themselves) with specified information about the transfer “in good time before the transfer is carried out”. The information required to be provided is (i) the date or proposed date of the transfer, (ii) the reasons for the transfer, (iii) the “legal, economic and social implications” of the transfer for the employees, and (iv) any measures envisaged in relation to the employees.
- France. French law does not provide for a specific requirement to inform and consult in relation to transfer of undertakings. However, general rules on information and consultation of the social and economic committee established in companies with 50 employees or more generally require that the social and economic committee be informed and consulted prior to any decision relating to the modifications of the legal or economic organisation of the business, which generally encompasses transfer of undertakings. As a result, binding agreements to consummate a transfer of undertaking cannot be entered into prior to the completion of such information and consultation procedure.
In addition, in case of transfer of an undertaking as a sale of a going concern (vente de fonds de commerce), the following rules are applicable:- In companies with less than 50 employees, the employer must, at least two months prior to the signing of the asset purchase agreement, inform all the employees assigned to such undertaking of its intention to sell the business with a view to allow one or more of such employees to make an offer for the purchase of such business. The 2-month time frame can be reduced if all employees waive their right to make an offer.
- In companies with 50 employees or more and less than 250 employees and whose turnover is less than EUR50 million or whose total balance sheet is less than EUR43 million (or both), the employer must, simultaneously with the procedure of information and consultation of the social and economic committee, inform all the employees assigned to such undertaking of its intention to sell the business with a view to allow one or more employees to make an offer for the purchase of such business.
According to the position of the administration, the seller is not obliged to accept an offer of the employees (if any) or to negotiate with the employees.
- Germany. In deviation to the Directive, both the transferor and the transferee must provide every affected employee with specified information about the transfer in an employee information letter prior to the transfer of undertaking, whereas no obligation to inform the trade unions exists. Such employee information letter is a quite technical and lengthy legal document that must be delivered in writing or by e-mail. As a practical matter, the employee information letter should be delivered at least one month prior to the transfer of undertaking, in order to gain clarity on which employees actually transfer at the closing of the transaction (as the one-month objection period will have generally lapsed). The information required to be provided is (i) the date or proposed date of the transfer, (ii) the reasons for the transfer, (iii) the “legal, economic and social implications” of the transfer for the employees, and (iv) any measures envisaged in relation to the employees. Generally, a “measure” may include limited changes or adjustments to the terms and conditions of employment, changes to work locations or practices, redundancies or administrative changes.
- Italy. If the transferor employs more than 15 employees, both the transferor and the transferee must notify the applicable trade unions and works councils 25 days before entering into a binding agreement for the sale of the business. The information required to be provided includes (i) the date or proposed date of the transfer, (ii) the reasons for the transfer, (iii) the “legal, economic and social implications” of the transfer for the employees, and (iv) any measures envisaged in relation to the employees. Generally, a “measure” may include changes or adjustments to the terms and conditions of employment, changes to work locations or practices, redundancies or administrative changes.
- UK. Both the transferor and the transferee must provide representatives of their respective affected employees1 (or, in certain circumstances if there are no representatives, the employees themselves) with specified information about the transfer long enough before the transfer to allow meaningful consultation to take place. The information required to be provided is (i) the date or proposed date of the transfer, (ii) the reasons for the transfer, (iii) the “legal, economic and social implications” of the transfer for the employees, (iv) any measures envisaged in relation to the employees (by either the transferor or the transferee), and (v) certain information in relation to the number and roles of temporary agency workers within the organisation. The concept of a “measure” is interpreted very widely and may include changes or adjustments to terms and conditions of employment (for example, in relation to benefit or pension provision), changes to work locations or practices, redundancies or administrative changes such as changes to the date an employee is paid. Separately, there is an obligation on the transferor to provide certain information about transferring employees (referred to as “employee liability information” or “ELI”) at least 28 days before the transfer.
Obligation to Consult
- EU Directive. Where the transferor or the transferee envisages taking “measures” in relation to its respective affected employees, it must consult representatives of those employees on such measures “in good time before the change in the business is effected”. Consultation must be with a view to reaching an agreement.
- Belgium. Both transferor and transferee must consult their respective employee representatives bodies (works council or CPPT or trade union) about the contemplated transfer of undertaking. The consultation must be completed prior to any decision. Such obligation does not apply in the absence of employee representatives bodies.
- France. French law does not provide for a specific requirement to inform and consult in relation to transfer of undertakings. However, general rules on information and consultation of the social and economic committee established in companies with 50 employees or more generally require that the social and economic committee be informed and consulted prior to any decision relating to the modifications of the legal or economic organisation of the business, which generally encompasses transfer of undertakings. As a result, binding agreements to consummate a transfer of undertaking cannot be entered into prior to the completion of such information and consultation procedure.
In addition, in case of transfer of an undertaking as a sale of a going concern (vente de fonds de commerce), the following rules are applicable:- In companies with less than 50 employees, the employer must, at least two months prior to the signing of the asset purchase agreement, inform all the employees assigned to such undertaking of its intention to sell the business with a view to allow one or more of such employees to make an offer for the purchase of such business. The 2-month time frame can be reduced if all employees waive their right to make an offer.
- In companies with 50 employees or more and less than 250 employees and whose turnover is less than EUR50 million or whose total balance sheet is less than EUR43 million (or both), the employer must, simultaneously with the procedure of information and consultation of the social and economic committee, inform all the employees assigned to such undertaking of its intention to sell the business with a view to allow one or more employees to make an offer for the purchase of such business.
According to the position of the administration, the seller is not obliged to accept an offer of the employees (if any) or to negotiate with the employees.
- Germany. Where the transferor or the transferee envisages taking “measures” in relation to its respective affected employees, it must notify the competent works council in a comprehensive manner and in good time before a decision about such “measures” has been made. To the extent any such “measures” qualify as a change in the business operation, the employer must consult with the works council about such measures with a view to reaching an agreement on a reconciliation of interests and a social plan. Should an economic committee (Wirtschaftsausschuss) or a representative body for executive employees (Sprecherausschuss) exist, they have to be informed about any “measures” as well.
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Italy. From the date of receipt of the notice of transfer referred to in “Obligation to Provide Information” above, the trade unions or work councils have seven calendar days to file a request for consultation with the transferor and transferee. Once the transferor and transferee have received the request for consultation, they in turn have seven calendar days to start the consultation process. It is common practice for the transferor and transferee to conduct one consultation process together. The consultation ends after 10 calendar days , even if an agreement has not been reached with the trade unions or work councils. Overall, the consultation procedure may take up to 24 days to complete. Only consultation is required; unions cannot veto the transaction.
- UK. Where the transferor or the transferee envisages taking “measures” in relation to its respective affected employees, it must consult representatives of those employees on such measures with a view to reaching an agreement. There is no specific timeframe prescribed for the consultation period, but sufficient time must be allowed to allow meaningful consultation to take place.2
Sanctions
- Belgium. Failure to comply with these obligations may trigger criminal sanctions and claim for damages by employees or their representatives.
Parent Decisions
- EU Directive. The obligations to inform and consult apply irrespective of whether the decision resulting in the transfer is taken by the employer or by a parent.
- Belgium. The obligations to inform and consult apply irrespective of whether the decision resulting in the transfer is taken by the employer or by a parent.
- France. The obligations to inform and consult apply irrespective of whether the decision resulting in the transfer is taken by the employer or by a parent.
- Germany. The obligations to inform and consult apply irrespective of whether the decision resulting in the transfer is taken by the employer or by a parent.
- Italy. The obligations to inform and consult apply irrespective of whether the decision resulting in the transfer is taken by the employer or by its parent company.
- UK. The obligations to inform and consult apply irrespective of whether the decision resulting in the transfer is taken by the employer or by a parent.
[1] If the workforce is unionised, employers will be required to engage with union representatives. If no appropriate representative body is in place, the employer will generally need to arrange a ballot to allow employees to elect representatives.
[2] Note that, where large numbers of redundancies are envisaged, separate collective consultation requirements may apply.