In any merger or acquisition, especially in cross-border deals, human resources and employment law compliance have become increasingly vital.

Although such issues will never lie at the heart of the international M&A process, they can prove perplexing over the course of a cross-border deal, from due diligence and acquisition-agreement drafting through closing and post-merger integration.  The significance of HR and employment issues is likely to vary depending on the specifics of each deal but are often somewhat more complex in cross-border transactions.  It is important for prospective purchasers and vendors to address employment law considerations at the earliest opportunity in order to minimise further expense or delay further down the line. Acquisition Internationals speaks to the experts..

Carlo Fossati is an attorney at law, admitted to bar since 1995, partner of Studio Legale Ichino Brugnatelli e Associati since 2006. “When I joined the firm in 2003, I had already gained ten years’ experience with two domestic Law Firms, specializing in corporate law and labour law respectively. I regularly advise domestic and multinational companies on labour law issues related to mergers and acquisitions, restructuring and reorganizations, redundancies and downsizing.

Company clients span from the banking and financial sectors to fashion, telecommunication, chemical and industrial sectors. Employment law issues frequently arise in cross-border transactions. Italian constraining Employment Law is widely considered as one of the reasons for slow economic growth; but something is going to change on this side. Through 2011 and the first months of 2012, steps have been taken in order to allow every Company to negotiate their own  employment agreements with the respective Company Trade Unions, even if departing from National Collective Agreements (NCAs) with respect to some  provisions. Employment contracts at every job position level are regulated by Italian Civil Code, as amended by several pieces of legislation; nevertheless, high importance has been given for decades to NCAs.

The provisions of the latter are compulsory: neither can they be diverted from by company collective agreements, nor by individual employment contracts. Therefore, they put heavy ties on medium or big sized employers, with regard to personnel costs on the whole, and especially with regard to individual and collective dismissals. A reform strategy involving employment law is bound to make Italy an easier place for multinationals to do business, and also to stimulate productivity to the benefit of workers, especially the young ones, who are more and more aware of their foreign competitors.”Scott Landau is a partner with Pillsbury Winthrop Shaw Pittman LLP. His practice focuses on representing private equity clients and public companies in acquisitions, divestitures and restructurings within the U.S. and in cross-border transactions. He has significant experience designing executive compensation and nonqualified plan arrangements and providing counsel with respect to corporate governance matters.

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Pillsbury’s Executive Compensation and Benefits group advises on the spectrum of compensation, employment and employee benefits issues relating to cross-border transactions, post-transaction restructuring as well as day-to-day operational matters, including:

• Uncovering legal risks and hidden liabilities and assisting with deal document negotiations as they relate to human resources issues;
• Negotiating employment, transition and retention arrangements;
• Advising on tax and funds flow aspects of transaction bonuses and other compensation;
• Assisting with works council and union notification and consultation requirements and supporting employee representative negotiations;
• Advising on workforce reductions, in accordance with applicable employment protections such as “acquired rights” in the EU and the UK transfer of undertakings regulations;
• Implementing data transfer procedures in compliance with data privacy laws; and
• Facilitating payroll and benefits administration

Collaborating with our non-U.S. offices and trusted local counsel, Pillsbury has managed these and related activities for our clients’ cross-border acquisitions, mergers and divestitures involving operating entities in dozens of international jurisdictions. For multinational deals, each country’s legal and tax regime and HR practices raise unique issues.

For example, the identification and allocation of employee related liabilities is enormously jurisdiction dependent, and may include the funding of “gratuity” entitlements in India, mandatory profit sharing in Mexico and “FGTS” termination indemnities in Brazil, to name but a few. Structuring incentive pay is another challenging area for multinational enterprises. Pillsbury advises on tax, securities law and design aspects of traditional stock-based compensation, as well as profits interests, “phantom equity” plans and cash bonus compensation for private companies. Here, too, jurisdictional laws, tax efficiency concerns and other country-specific factors drive the design, implementation and administration of these arrangements. With our recent transactional experience in over 50 countries, Pillsbury adds value for our globally oriented clients.Yulchon was established in 1997, and since its inception, employment law has been one of the key practices of Yulchon. Attorney Advertising - Results depend on a number of factors unique to each matter. Prior results do not guarantee a similar outcome.

Mr. Sang Wook Cho is Partner at Yulchon LLC and Mr. Raymond M. Kang: Partner; Yulchon LLC. Mr. Raymond M. Kang commented: “Labor and employment matters can be among the most challenging issues a company faces, especially for foreign client because the labor environment and employment laws are quite different from jurisdictions like the US. In addition to the employee-favorable legal environment, there is often a personal element and cultural norms and unique local practices that come into play which are only familiar to practitioners with substantial experience. To that end, unlike other law firms that engage in employment law matters as a secondary or incidental practice, Yulchon has a team of employment law specialists whose main practice focus is employment law, which enables us to provide our clients with expert advice on both a legal and practical level that is second to none. Furthermore, because we regularly advise Fortune 500 companies and other foreign-invested companies in Korea on employment issues, we are very familiar with the types of employment issues foreign clients are interested in and therefore are able to provide effective advice that is on point in a highly efficient manner.”

Can you please define the key employment laws implemented within your jurisdiction? And explain the complexities of simultaneously addressing multiple countries’ employment laws?

“There are many complex employment issues that arise as a result of doing business in multiple jurisdictions. One of the most frequent issues we encounter is in relation to employment termination. In many cases, foreign companies (particularly US companies) that establish a Korean presence, either by way of incorporating or through an acquisition, wish to impose their global employment rules and regulations for consistency and ease of personnel management. Certain issues, such as termination, however, are quite different in that unlike the US, where at-will employment is permitted, allowing an employer to terminate an employee without cause, termination of an employee in Korea may only take place by a showing of just cause for the termination, which is a very high standard to meet. Furthermore, Korean labor laws require an employer to pay minimum severance pay to an employee upon termination, even though the termination is for just cause with very limited exceptions.

Therefore, educating foreign clients on these issues becomes a challenge, and once educated, implementing policies that are compliant with local laws but compatible with the client’s global policies can be a long and challenging process.”

Anne MOREL is partner with BONN STEICHEN & PARTNERS in charge of labour and employment law as well as compensation and benefits. She can assist and represent in court mainly industrial companies and companies of the banking sector. BONN STEICHEN & PARTNERS was founded on January 1st, 2012 by eight of the original ten partners of the former firm BONN SCHMITT STEICHEN.

“I have been in charge of labour and employment law since 1998. We have notably been involved in the major restructuring operations of a worldwide industrial group of companies and have assisted several banks in negotiating their process of a social plan in the framework of collective redundancies.My team assists clients in all aspects of employment law. The services we provide include drafting employment contracts, advice on employment termination, assisting clients in information/consultation procedures and negotiating with employees representatives/trade unions in respect of collective bargaining agreements/social plans.”

Can you please define the key employment laws implemented within your jurisdiction?

“Luxembourg employment law is predominantly based upon the Labour Code, which also contains provisions implementing European directives (e.g. posting of employees, protection of employees in the event of transfer of undertaking…).

When carrying out cross-border transactions, attention must specifically be brought to the timing in implementing the various national legal requirements. What are the key benefits of having an employment law expert on the deal team?

“In case of collective redundancies, the employment terminations are null and void if the employer has not complied with the legal requirements.”How can you and your team assist prospective acquirers in overcoming employment law issues through each stage of a cross border transaction?
 
“We first assess the implication of the contemplated transaction on the personnel in respect of any eventual prior information/consultation requirements and of any information/consultation/negotiation requirements to implement the transaction. We assist our clients throughout the process and prepare any ancillary documentation related to the said transaction.”