Information and consultation of staff representative bodies during acquisitions

8 minute read
06 November 2014

Or, the unlikely meeting of the stressed rabbit from Alice in Wonderland with the Works Council and the Hygiene, Safety and Working Conditions Committee.

The obligation to conduct an information and consultation procedure prior to any acquisition is now well-known, even to those outside France. Business people know that, before any acquisition, regardless of which side of the negotiating table they are on, the Works Council must be consulted. While discussion is always possible as to which types of proposed acquisition require the information and consultation procedure, the issue of its duration remains open.

Time management in procedures involving the information and consultation of staff representative bodies during acquisitions was previously the major uncertainty factor for the parties to the operation. As no specific deadline was set by law, only concepts developed through court decisions were defined, e.g. "reasonable time", "sufficient time" or even "in good time". This French peculiarity, which could practically mean the suspension of operations or even discussions (or a form of hostage-taking) in anticipation of the sacrosanct "opinion of the Works Council", the magic word that would permit the closing of the deal, was a major hurdle when it came to acquisition operations by investors (especially foreign) who faced delays and procedures of unpredictable duration.

The only possible recommendation was transparency and the provision of the most accurate data possible in order to avoid an endless back-and-forth and repeated requests for further information. This lack of any time limit could be easily exploited by social partners and sometimes go as far as a war of nerves, as delaying tactics were the only weapon available to the Works Council: an unfavourable opinion could not block the process.

Into this well-known situation the legislature thus introduced two ways designed to limit such information and consultation procedures: first, negotiation and, failing this, the closing of consultation procedures that were deemed to meet the necessary conditions. Henceforth, the consultation period may be the subject of collective bargaining: in the absence of any agreement, the countdown begins and, on the expiry of the deadlines that are now fixed in law according to case, staff representatives are deemed to have been consulted (and to have given a negative opinion). There is no further need for trench warfare and intentional obstruction becomes almost impossible.

The law has introduced specific deadlines for all consultations of the Works Council that are not otherwise subject to specific time limits (such as redundancies for economic reasons of more of 10 employees over a period of 30 days). In the context of information-consultation procedures in the event of a change in the legal status of the company, the Works Council's opinion may not be given, unless it expressly decides otherwise (taking into account the fact that it has had sufficient time and information to make a decision), for at least 15 days from the moment it receives the information related to the project. In other words, at least two weeks are required between the delivery of the documents and the opinion (two meetings are not however necessarily required). Failing agreement upon a shorter period, should the Works Council not have delivered its opinion one month following the disclosure of the information required for consultation purposes under the Employment Code, the information-consultation procedure is deemed to have been completed and the Works Council is deemed to have given a negative opinion. This period is extended to two months if the Works Council wishes to make use of an expert, and three months if an appeal has been made to the Hygiene, Safety and Working Conditions Committee (CHSCT).

The matter of the length of the proceedings is thus now limited by law. There remains the evolution of case law regarding the health and safety of staff, which now reinforces the interventions of the CHSCT in information-consultation procedures. Until the Court of Cassation ruled on the need to involve the CHSCT beforehand on matters of interest to the organisation and general running of the company (regarding the stress caused by the introduction of appraisal methods or anxieties generated by changes to working conditions resulting from a restructuring plan), the question only rarely arose of the involvement of the CHSCT in information-consultation procedures in relation to acquisition operations.

The Employment Code provides for very specific cases of information-consultation as regards the CHSCT. In addition to these well-defined procedures, however, the law provides an obligation of "consultation before important structural decisions modifying health and safety conditions or working conditions and, in particular, before any major change to workplaces arising from a change in tooling, change in product or change in the organisation of work, as well as before any change in performance levels and productivity standards whether or not these are related to the remuneration for work".

From this very general obligation, which the Employment Code does not precisely define, disputes have arisen regarding the need to involve the CHSCT prior to decisions related to the organisation of work and the impact that these might have on employees. The Labour Division of the Court of Cassation held in a famous decision that "taking into account the possible repercussions on working conditions of introducing appraisal interviews, the employer is required to consult the CHSCT beforehand". Similarly, in a more recent interim ruling, the courts suspended an ongoing employment protection scheme on account of the failure to consult the CHSCT. Management believed that their staff redundancy programme would in no way alter the working conditions of the remaining employees. The stress and anxiety for employees that a restructuring programme might produce now requires consultation of the CHSCT, not only prior to the decision but also when the consultation with the Works Council is finalised. This was also the ruling handed down by the Paris Court of Appeal in a case where the FNAC company produced two restructuring plans: the court decided that the employer should appreciate the health and safety risks of any project under its general prevention obligations, including the possible psycho-social risks induced by restructuring.

It is on this basis that the question now arises of the intervention of a new player in the information-consultation procedures related to acquisition operations. How is it possible to be sure that a proposed acquisition of the company will not generate stress among employees?

Such certainty is unlikely in the event of the disposal of a business, for example. Indeed, the disposal, change of employer and, potentially, integration into a new company may appear as a source of stress and anxiety; and it cannot be excluded that such an operation might ultimately result in changes to the organisation of work.

What about disposals of securities with no change of employer? This question should be raised as regards acquisitions in order to avoid difficulties with social partners or even with the courts, which might challenge the timing (currently long, but at least predictable) of the operations planned.

While Alice's rabbit may no longer be a sprinter in respect of company acquisitions, he is at least no longer completely in the dark!

This article was written by Valérie Blandeau and Jerome Patenotte and was published in Magazine des Affaires.

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