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Global workforce reorganization part 4: information and consultation obligations

  • United Kingdom
  • Coronavirus - Workforce issues
  • Employment law

13-08-2020

Getting consultation right is at the heart of a successful global workforce reorganization process, however there is often a tension between the need to make changes quickly and the need to ensure that information and consultation obligations are met in order that risks can be managed and changes  can be effectively realized.

In this Part 4 of our series of materials on global workforce reorganizations, we focus on employee representative bodies, including works councils, and highlight some of the information and consultation considerations for global employers planning a reorganization exercise. We also provide some practical tips for managing global consultation.

In many countries, particularly in Europe, a wide range of global workforce reorganization exercises will trigger information and consultation obligations. In this briefing, we therefore refer to reorganizations in the broadest sense, encapsulating not only headcount reductions, but also reorganizations that impact how work is organized, undertaken, where and by whom. For example, moving work to different locations within an organization, outsourcing or insourcing functions, or introducing new technologies.

Failing to recognize and action information and consultation obligations, including those related to workforce changes that do not result in an immediate headcount reduction, is a common pitfall for global employers, and can create an unexpected and often significant negative impact on the risk profile, timing and cost of reorganization exercises.

Different jurisdiction, different worker engagement landscape?

In many countries, workforce engagement arrangements provide a conduit for the workforce to gain early knowledge of, and in certain circumstances be involved in, company decisions. Such engagement may be with trade unions, works councils (national or European), other employee representatives, the workers themselves or a combination. Further, these may be prescribed by law or organized on a voluntary basis.

The existence of and interaction between different employee representative bodies within an organization can add an additional layer of complexity to any global workforce reorganization exercise. In many cases, there may be different bodies representing different elements of the workforce by role or location, or a tiered approach. For example, in Germany, where works councils may operate at establishment, entity or group level. Early determination of the existence and remit of any employee representative body or bodies, or the requirement to establish one, should therefore be one of the primary steps in any process.

The type of employee representative body will often vary by jurisdiction. Works councils tend to be a European concept, often being legally-required with jurisdictional requirements in terms of composition, remit, election procedure, roles and powers. However, outside of Europe, works council-type arrangements and requirements also exist in various other guises. For example, in South Africa where workplace forums provide a channel for workforce engagement on issues such as restructures and the introduction of new technologies.

In some jurisdictions such as Singapore, Italy, Russia and the US, trade unions tend to lead the worker representation landscape. In other jurisdictions, a combination of trade unions and works councils/employee representative bodies, or even several different works councils or unions within a single organization, are more usual. For example in the UK, where many larger companies have established employee forums to consult with employees on a variety of topics, those forums often working in parallel to trade unions.

Employee representative body triggers

Where employee representative bodies are a requirement, there will often be prescribed triggers for establishing such arrangement and/or providing information and consulting.

With the exception of the requirement for the establishment of European Works Councils, where a European Directive ensures that an employee request and threshold trigger applies uniformly across the member states of the EEA, there is little global consistency in triggers for establishing employee representative bodies.

In some jurisdictions, the trigger will be the number of employees within the company. For example, in France where companies with at least 11 employees must establish a social and economic committee (CSE - Comité social et économique) and in the Netherlands where an employer with 50 or more employees is required to set up a works council. In other jurisdictions, the trigger may be the request or election by employees.

Ad hoc events within a company can also trigger the requirement to establish an employee representative body, where one is not already in existence, and information and consultation obligations. The sale of a business, the outsourcing of part of a business function or a proposal to terminate the employment of a certain number of employees are common examples. For example, in the UK, the proposed dismissal of 20 or more employees at one establishment within a 90 day period will trigger an obligation to elect (in the absence of an existing elected employee representative body or recognized trade union representing the affected employees) and consult with employee representatives.

However, other less obvious potential triggers should not be overlooked. Hiring decisions, promotion or assignment, economic proposals, major investment on behalf of the business, decisions impacting health and safety, changes to terms such as roles and location and certain internal social decisions such as an arrangement on working hours or holidays, are just some of the examples that exist globally.

An obligation to reach agreement?

Understanding at an early stage whether there is a requirement for agreement following consultation will often be pivotal in determining the project strategy.

In some jurisdictions, as long as it can be demonstrated that the consultation was entered into genuinely, with a view to reaching agreement, the obligation to consult will be met.

In other jurisdictions, the requirement can be more stringent, with legislation regulating agreement on certain matters and in certain circumstances. For example, in Germany, the works council’s participation falls into three categories, namely the right to be informed, the right to be consulted and the right of co-determination. Co-determination rights require, in some cases, the employer to reach an agreement with the works council. If no agreement can be reached, the conciliation board or in some cases an employment tribunal will look at the issues and decide the matter.

Timing and formalities

Time lines and formalities for consultation in different countries will vary and must be understood and built into the planning stage. In many countries, including in the US, there will be no consultation requirement, although any notice requirements, including, for example, requirements under the US WARN Act and comparable US state legislation, will impact how quickly the process can be completed.

In those jurisdictions where collective consultation timing is prescribed, the information and consultation stage can range from a few weeks to a number of months. Where the timing is not prescribed, the timing will be less certain, however can be similarly lengthy.

Reorganization part 4 table

Usually, consultation must be carried out before a decision is taken. Formal notifications may require original “wet signatures” and specific signatories or powers of attorney. It may also be necessary to notify the authorities in advance of proposed workforce changes, which can also impact the timing if not properly planned in advance.

In some jurisdictions, such as France and Spain, very detailed and lengthy documents – an economic note to the Social and Economic Committee in France and a technical report to the authorities and employee representatives in Spain – are a requirement of the process. Time for the preparation of such documents should therefore be built into the planning process.

Global at-a-glance comparison

Our at-a-glance document highlights some of the information and consultation obligations in different jurisdictions.

Consultation – pitfalls and the risks of getting it wrong

Careful planning will be key to avoiding pitfalls in any global workforce reorganization exercise. Particularly in Europe, but also in many other jurisdictions globally, any measures that impact on workforce arrangements or terms of engagement are likely to require some level of information and consultation. The planning exercise should take account of the cultural differences and legal requirements between jurisdictions, the nuances associated with different representative bodies across sites and the interaction between such bodies across the organization.

In the current environment, plans should also be sensitive to employees often working under different and challenging conditions. Further the aim should be to maintain an effective working relationship with employee representative bodies, particularly where future change exercises may be required.

Omitting to properly comply with information and consultation obligations can have a significant impact on a workforce reorganization exercise. Aside from the potential process delay, penalty costs and employee relations aspects, injunctive relief may be available in some jurisdictions to stop the process altogether and/or there may even be criminal sanctions. In some jurisdictions, a failure to carry out proper and meaningful consultation may render the entire procedure void.

One of the common challenges for global employers is the timing of consultation. In many jurisdictions, there will be a requirement to start consultation when the course of action is still a proposal, ensuring that meaningful consultation can take place. This can significantly extend the process at a time when a decision needs to be made quickly, tempting organizations to cut corners in the process and thereby increase legal risk.

As part of the planning process, a decision must be made on whether to start consultation in all countries simultaneously, even if they are then likely to conclude at different times, or consult at different times in different countries. Often, the difficulty with the latter option is creating uncertainty in local organizations where consultation has not yet started. Further, being able to demonstrate that a proposal being at a stage to start consultation in one jurisdiction doesn’t mean that consultation should be started in another jurisdiction in order to start in good time. Conversely, if consultation starts at the same time but can be concluded in some jurisdictions earlier than in others, being able to demonstrate that a decision reached at the conclusion of consultation in one jurisdiction does not impact the genuineness of consultation in another.

Another challenge is documents and communications, including maintaining confidentiality over sensitive information and determining how much information should be provided, whilst ensuring cross-border consistency. Too little information and the consultation may not stand up to challenge, but too much can cause confusion, prolong the process and subject it to additional scrutiny.

Additionally, verbal and written communications can be questioned if they indicate that a decision has already been made before the conclusion of the consultation exercise. Announcements to employees and project planning documents including reviews, designs, and investigations regarding a new organization structure or other changes that may have an employee impact, can all be open to challenge and will require precise preparation.

Despite these challenges, careful early planning will often mean that strategies can be identified to overcome hurdles without increasing legal risk. For example, in those jurisdictions where there are potentially long consultation obligations, there may be options for moving the process on by reaching an early agreement with employee representative bodies, particularly where there are resources available to finance a rapid conclusion of the process. Further, careful drafting and control over process communications can minimize the risk of challenge and ensure that confidentiality is maintained.

Information and consultation – practical checklist

Planning and getting the communication right is critical to implementing an effective global workforce reorganization. The strategy should include a well-constructed communications plan, with associated supporting materials to help managers steer through the process.

The following key points should be considered:

  • understand the legal and practical issues in relation to information and consultation requirements in each jurisdiction, including applicable triggers
  • determine the existence of any works council or recognized trade union at any affected site and the terms of any collective bargaining agreements
  • devise a consolidated and coordinated global plan, to include those information and consultation requirements
  • ensure that sufficient time is incorporated into the project plan for the preparation of necessary consultation documents, as well as the consultation exercise itself
  • follow a detailed project plan per country
  • agree consultation protocols, including ensuring data privacy and business confidentiality is protected and the security of platforms on which information is disseminated
  • decide how much information should be provided
  • restrict communications/information/documentation to those that need to know
  • ensure that no final decisions are made where consultation is ongoing, and that documents and communications reflect that
  • ensure that the consultation plan can be flexed where necessary to take account of issues that may arise
  • as far as practicable, adopt a collaborative approach to consultation

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For further materials in this series, see our Global Workforce Reorganization Planning Tool Global Workforce Reorganization, Part 2: Working Across Jurisdictions briefing and our - Global Workforce Reorganization, Part 3: Legal Compliance Considerations of New Working Arrangements briefing.

Our extensive global footprint means that we are well placed to help employers, wherever they have a presence. Our teams across the world have been supporting employers to steer through the legal and practical employment implications of the global shift in the working landscape.

Please contact the following partners if you require advice and assistance:

Global:

Diane Gilhooley
Hannah Wilkins

Elizabeth Graves
Constanze Moorhouse

US:

Scott McLaughlin
Michael Woodson
Michael Hepburn
Marlene Williams

Asia:

Jennifer Van Dale 
Jack Cai

Europe:

Frank Achilles
Deborah Attali
Valentina Pomares
Ingrid van Berkel
Wijnand Blom