Walk the talk for any restructuring

In a recent case (USA v Nolan), the advocate general of the European Court of Justice (ECJ) Paulo Mengozzi reminded us of a key principle in any restructuring: a company’s communication strategy.

First, the facts: in June 2006 the US authorities gave the representatives of the civilian workforce at a military base in the UK a memorandum stating that following a decision to close it, all personnel would be made redundant. But the decision to close the base had already been taken by the secretary of defense as early as March 2006.

Consequently, the question arose whether the consultation obligation (laid down in the EU Collective Redundancy Directive 98/59 (CRD)) was triggered too late.

Although the ECJ stated that it had no jurisdiction to rule on this matter, the advocate general’s opinion helps to clarify the ‘trigger point’ for the obligation to consult.

Referring to Akavan the advocate general reminded us that the obligation to consult is triggered by the adoption of a strategic decision, or a change in activities, which compel the employer to contemplate or plan for collective redundancy. The issue before the court in Akavan had to do with the timeliness of the communication, regarding the decision by parent company Siemens Fujitsu Computer to terminate most of its operations in Finland.

Clearly, the obligation to consult is triggered irrespective of whether the decision is initiated by the employer or a controlling entity and irrespective of their physical location. It does not depend on whether all information required to consult is readily available.

Consultation with a company’s European workforce should be meaningful, ie it should cover ways and means of avoiding collective redundancies, reducing the number of workers affected and methods of mitigating the consequences (facilitating redeployment or retraining).

This brings us to one of the cornerstones of any restructuring: the timing of a company’s communication strategy.

Whether it is the company itself or a parent company taking the decision, it will need to act cautiously but swiftly.

Restructurings affecting different European member states are even more complex and require a solid project management approach and flawless execution of a communication strategy.

As a guide, the following three aspects should be considered when contemplating strategic decisions affecting employment: timing and co-ordination of the legal procedures to be complied with; content and timing of the communication to internal stakeholders such as employees as well as external stakeholders such as suppliers and clients; and budgeting of costs related to the time needed to comply with legal requirements, the cost of redundancy and termination payments, contingency plans and consultancy fees.

These aspects may be encapsulated beforehand in a transnational company agreement. Through such an agreement, an environment conducive to constructive social relations may be created.

Filip Corveleyn, partner, L&E Global Belgium, wrote this article, which first appeared in The Lawyer and can be also found here.