Even as IPOs bloom this spring in the technology sector, there exists well publicized macro-economic uncertainty, stemming from Brexit concerns, among other developments. Real threats to free trade and investment flows remain, with the potential for a much more serious outbreak of protectionism and isolation on a global scale. A recession may or may not be looming, depending on the day and your media outlet.
In these uncertain times, the best counsel know to be prepared for everything, including business change. To successfully manage global business change, in-house counsel must identify potential legal roadblocks, plan ahead and provide a strategic approach. Counsel must be prepared for everything, including some tough decisions:
- Cost-realignment such as furloughs, compensation reduction or benefit forfeitures;
- Workforce reductions;
- Reorganizations; and
- Transfer relocation and seconding of employees.
When applied to a global workforce, the above business changes may be fraught with local law obstacles. These obstacles will require adept navigation from company leaders in order to minimize not only risk of employment litigation but also risk to employee engagement, which can have an even bigger impact on business success.
Within the US, federal and state specific requirements require planning ahead despite the at-will, non-unionized environment. However, in other jurisdictions, a longer timeline may be necessary. For instance, in certain jurisdictions, measures such as wage freezes are not permitted locally or there maybe notification/ consultation requirements with employee representatives.
Fortunately, with some planning ahead by in-house counsel, changes are manageable as part of an effective business “survival” strategy for these uncertain times.
What to look out for:
The following incentives are typically easier to modify:
- Those offered by the parent company, not the local employer (e.g., equity awards); and
- Truly discretionary incentives.
The following steps are often, but not always, required to implement change:
- Economic justification;
- Consultation; and
When communicating changes to employees, consider:
- Using anticipatory and preparatory language to avoid giving the impression any required local consultation or consent process is meaningless; and
- Professional translation, where local language is required or is the norm.
When planning global reductions in force, determine any alternative timelines and costs, based on the following considerations in every location:
- Economic justification legally required;
- Process to be followed, including selection criteria;
- Appropriate communications, especially before any required consultation is complete;
- Statutory and contractual entitlements;
- Whether to seek releases and what is required to obtain enforceable ones;
- The impact to any equity awards; and
- The impact on immigration sponsored employees and their families.
In the context of a reorganization, consider whether:
- Employees transfer automatically between entities;
- Severance entitlements are triggered or can be avoided;
- Change in job site or relocation triggers obligations to employees;
- Temporary “employee leasing” is necessary and permissible;
- There is an impact on any equity awards;
- There are any impacts on immigration sponsored employees and their families;
- Impacted senior managers require a modified approach by law or local custom;
- There is opportunity to “clean up” or “harmonize” term and conditions, including contracts, policies, benefits, and restrictive covenants; and
- Employee representative bodies should or must be formed, modified or consolidated.
For more detail, please read our article in the ACC Docket, or reach out to your Baker McKenzie lawyer.