Dealing with labor and employment issues when acquiring a business in Europe can be a complicated process. In addition to being represented by a national labor union, target company employees may also have local unions or work councils that have consultation or informational rights that the parties must address during the deal process.
A recent Willis Towers Watson blog offers some guidance on the rights that employees may have under the laws of various European countries, the type of issues that cross-border buyers may confront and advice about “best practices” on how to navigate them. This excerpt discusses the potential downside of labor law missteps during the deal process:
Understanding what information/consultation obligations might apply at the outset of the transaction and assessing whether they need to be built into the transaction structure and/or timetable are essential.
Not factoring in works councils is costly, time-consuming, detrimental to the deal’s “optics,” and will hinder the progression of a deal and even cause its demise. Tackling works council rights quickly and proactively is crucial to avoid unwanted delays or sanctions including:
– Penalties/fines, some of which can be of criminal nature (in France, for example)
– Strikes or employee walkouts that can impact the deal or delay the close
– Tense social climate
– Closing delay
– Damages (In Belgium, for example, companies may be required to pay remunerative damages to employees.)
The blog also highlights some country-specific obligations that buyers will need to have to factor into the deal process and that may impact the timing of transaction.
– John Jenkins, DealLawyers.com, August 11, 2023
