How to manage a mass lay-off Ten tips for undertaking a successful and honourable employee restructuring transaction in Belgium www.allenovery.com
2 How to manage a mass lay-off 2013 Allen & Overy LLP 2013
3 Restructuring timetable Set out below is a brief sample timetable for a restructuring process. This timetable can vary depending on the specific circumstances and countries involved. Phase 1: Preparation Business case and Q&A Contingency planning Communication (internal external) Social plan design and features Phase 2: Information/ consultation Provide info on the business case to works council/unions Consult on adverse employment consequences Opinion/advice from works council Phase 3: Negotiation Collective bargaining on social plan Provide redeployment or alternative employment opportunities Notification to the authorities Phase 4: Implementation Managing bridging pension file Redeployment efforts Implement redundancies An exceptional firm with a phenomenal client base, for which they act globally. Chambers Europe 2011 (Employment) www.allenovery.com
4 How to manage a mass lay-off 2013 Ten tips for undertaking a successful and honourable employee restructuring transaction in Belgium Amidst the current continuous turmoil of plant closures, collective lay-offs and employee restructurings probably the strongest wave in over a decade (in number of job losses and the adverse impact on overall employment) it is quite remarkable that many corporate organisations are still surprised and overwhelmed by the process, be it in terms of adverse media attention, industrial action, unrest or sometimes the chaos, length and duration of the process or the overall wider cost. Therefore, we suggest ten tips that we think will lead to the successful management of an employee restructuring in Belgium and help achieve the main objectives of a smooth, timely and cost-effective restructuring. We do not touch on the particular environmental factors, the peculiar features of the industry or the business, or the specific constraints or opportunities that may have a direct bearing on the approach and pursuit of the transaction. Most of the issues addressed below focus on the Belgian market. However, they can just as easily apply to a cross-border setting in Europe, which may involve additional layers of communication and consultation (at a European works council level for instance), and added complexity because of the juxtaposition of so many national regulations and practices. 1_Take your time to study, prepare and test the working hypotheses. Before engaging in any major structural change to your business in Belgium, it is wise from a business, and also from a legal and HR perspective, to carry out a proper long-term analysis of where the business is going and what the opportunities and threats are before starting to prepare for a timely restructuring. Depending on the nature and key drivers for your business, testing working hypotheses such as evolving market (or customer) demand, competitive threats and opportunities as well as alternative approaches to a restructuring (business sale, outsourcing, temporary idling etc) could be an indispensible exercise before you reach the point of no return in the preparation process. 2_Focus on the long-term effects rather than on the short-term gains. No matter how short business and product cycles, how volatile consumer and customer expectations and demands, and how short the attention span of markets, investors and media watchers are these days, dismantling a business, retrenching a plant and letting go of a lot of colleagues and workers have obvious long-term effects which far exceed the speed of the decision-making process, the initial spotlight of success and the end of the next fiscal year. No matter how hard the above constraints may weigh on the decision-makers minds, we think that it is key to allow for time to consider and balance the loss of know-how, team spirit, engagement, commitment and productivity against the short-term gain on labour costs, investment and return on equity. Allen & Overy LLP 2013
5 3_Quality of preparation dictates the quality of the process. In a transaction such as an employee restructuring, the scope and depth of the preparatory steps are key to ensuring its success. The scope of preparation would, in our view, cover things such as internal and external, including regulatory, communication plans, the business rationale for the transaction (focusing on global, regional and local market developments and their impact on the affected business), contingency planning (to be prepared for the worst) and obviously the preparation of the social plan and for the collective bargaining process. This preparation requires sufficient time: typically between six and eight weeks (depending on the circumstances). The success of the transaction may be adversely affected by allowing for too little time, or if the responsible teams lack the commitment or dedication. 4_Quality of the labour relations dictates the quality of the conflict. Restructuring transactions are not entirely unexpected as they are often the culmination of a lack of success, adverse economic circumstances, misfortune, but perhaps also due to flawed decisions, lack of attention/investment in the local site and other personal factors. In that sense, as a process, the management of a restructuring transaction builds upon and is dependent upon the quality of the collective labour relations as they have developed in the years preceding the transaction. The stronger the labour relations (in terms of transparency, trust, respect etc), the less confrontational the inherent conflict of an employee restructuring will be. Likewise, the weaker the labour relations, the more crucial the preparatory steps will become in managing potential conflict. 5_If possible, shy away from the judicial route to resolve conflict. Society is in general becoming more litigious and labour relations (also in Belgium) more often end up in a labour court than ten years ago (both employers and trade unions increasingly use judicial intervention). In our experience, and in the longer run, it has rarely been beneficial to management and shareholders to allow a conflict to degenerate into judicial proceedings. Although the legitimate protection of business interests may sometimes warrant strong legal action, which we clearly support, it is obvious that the escalation of an industrial conflict to a judicial solution rarely results in a beneficial outcome, and prevents management from meeting its goals of a smooth, timely and cost-effective restructuring, and certainly not from the perspective of a going concern. 6_Remain purposeful and solution-driven at all times keep key drivers in sight. One of the key features of the Belgian collective lay-off procedure is the absence of a clear timeframe, since the information/consultation stage has no strict deadline. In practice this stage may take between one week and six months and on average it takes about two months to complete. During this stage the employees remain in service and on the payroll, and so trade unions often feel it is in their (short-term) interest to draw out this stage of the process as long as they can. The best approach is to remain purposeful, to keep the frequency of the works council (information) meetings high, and to address the repetitive questions and tolerate the absence of counterproposals in order to overcome this challenge. This is one example of how focusing on the key drivers and the ultimate purpose may help you overcome this hurdle. www.allenovery.com
6 How to manage a mass lay-off 2013 7_Acknowledge sound corporate practice beyond law and precedents. Although the regulatory framework for handling employee restructuring is quite well established in Belgium, which includes high levels of (financial) protection in the context of redundancies (in terms of notice, termination compensation, supplementary unemployment benefits and outplacement services), it is standard corporate practice to engage in collective bargaining to negotiate fair and decent separation packages with the workforce representatives (trade union). In this context, the level of expectations of both unions and workers usually exceed (sometimes by quite a bit) the already quite generous level of protection offered by Belgian law. Faced with such demands, we believe it is key to (i) find inspiration in the relevant industry or regional examples of collective arrangements, (ii) stay focused on the particularities of the workforce affected by the pending transaction (in terms, of age, length of service, skill set, realistic perspectives on the labour market, etc) which allows the tailoring of features of the social plan, and (iii) remain receptive to form over substance approaches to address the expectations of the affected personnel. 8_Focus on redeployment and on hope for the future rather than money. Although the workers expectations and the unions claims are most often spelled out in direct financial terms and packages, there is a noticeable trend in the market to return to basics. What is the ultimate goal when people lose their job? To find an alternative job, comparable (if not better) as soon as possible. Assisting them in doing so, by way of training, conversion, re-skilling, outplacement and all the costs associated with these services is probably the most direct and relevant assistance an employer can give. Enhancing job mobility and labour market flexibility will probably not be achieved as easily if the bulk of the cost of restructuring is to reward past loyalty rather than to look ahead to new opportunities. Allen & Overy LLP 2013
7 9_Challenge the obsolete criteria proposed by the unions (age seniority). In the context of collective bargaining over restructurings, apart from a clear focus on the financial packages (rather than assistance and services), trade unions would traditionally distribute and allocate the available packages on the basis of two very basic criteria, one directed towards loyalty (length of service) and the other towards the perceived difficulties of obtaining a new job (age). Both these criteria are under obvious scrutiny as they are discriminatory. These criteria can also be criticised in the context of a modern, forward-looking, and redeployment-driven approach to social plans. What about skill set, competencies enhancement, the family situation, measured productivity and performance results etc as new criteria for allocating benefits in this connection? 10_Secure top-end, pragmatic, dedicated and uncompromising assistance throughout the process. Finally, an obvious tip. Most executives fortunately do not experience transactions such as an employee restructuring too many times in their professional careers, and when they do, the laws, regulations, practices, culture, etc may have changed considerably from the last time they were faced with these challenges. Conversely, the trade unions, the employers natural sparring partners, employ seasoned professionals who are constantly being trained and educated. Moreover, these processes tend to become more complex, more cumbersome and are more strictly enforced as time passes. In terms of compliance and risk management, certainly not something to ignore! For all these and many more reasons, it is crucial for companies facing restructuring transactions not only to be well prepared but also to be ably assisted and led through these procedures. In providing this assistance, knowing the law is obviously not enough, since over 70% of these transactions involve pragmatic, down-to-earth industrial relations rather than law. Having experience of dealing with trade unions is clearly a must, not only in terms of understanding the trade unions strategies and tactics, but also in terms of earning their respect. Finally, dedication, the uncompromising defence of a client s interests, and the thoroughness and speed of operation are the main qualities one would look for in your top-end professional advisers. www.allenovery.com
8 How to manage a mass lay-off 2013 Our Employment Restructuring team in Belgium Allen & Overy s Belgian Employment & Benefits practice consists of a team of dedicated experts who advise on the local and global issues associated with people and reward in corporate organisations, both on advisory and transactional work. We offer clients: Strategic client focus We endeavour to consistently provide outstanding service and superior value to our clients business. We aim to (i) deliver technically excellent advice, (ii) understand the commercial aspects of our clients business, and (iii) anticipate our clients requirements and provide pragmatic solutions. Full support from a cross-practice restructuring team Our team combines employment, banking, corporate, insolvency and tax expertise. Our lawyers can assist on a full spectrum of restructuring issues. Their commercial approach is focused on the success of our clients business. Use of our know-how We can give clients free access to our employment restructuring online service, which is available 24/7 and which gives a quick overview of the potential issues that may affect their restructuring. Our understanding of key issues Our experience has enhanced our understanding of the commercial requirements and concerns of all parties affected by a restructuring, which is of great value in negotiating and managing transactions. We understand the importance of thorough preparation, flexibility, cost control and risk management. Efficient resourcing Every matter on which we advise is managed with a view to providing both optimum efficiency and a cost-effective service to our clients. To this end, we ensure that each part of a project is properly resourced and carried out by lawyers with the most appropriate level of expertise, be it at partner or junior associate level. We are very happy to provide further information on any aspect of our employment restructuring practice. We are the only globally integrated, full service law firm with a dedicated and deeply rooted Employment & Benefits practice in Belgium. In our client base, you will find more than half of the BEL 20 listed companies. Our global Employment & Benefits practice group serves more than a third of the Global 100 companies, and more than a third of the FTSE 100. Allen & Overy LLP 2013
9 Our employment restructuring online tool If you are embarking on a cross-border restructuring, it is crucial that you understand your employment law obligations at an early stage. The Employment Restructuring Roadmap is an online resource which summarises the key practical steps to be taken in relation to employees and their representatives on cross-border restructuring transactions and downsizings. The tool provides up-to-date information concerning 27 jurisdictions. Benefits of using this tool: Access practical guidance on coordinating employee issues on cross-border restructuring transactions and downsizings. Identify key procedural obligations in relation to employees and their representatives in 27 jurisdictions. Perform a comparative analysis of these procedural obligations across multiple jurisdictions. Access useful resources including links to legislation, publications and contact details of experts in each jurisdiction who can assist you further. Manage key employment law obligations on a cross-border restructuring. Identify, at a glance, which consultation and other procedural requirements apply and the related timing and cost implications. www.allenovery.com
10 How to manage a mass lay-off 2013 Your Employment & Benefits experts in Belgium Christian Bayart Partner Tel +32 3 287 7452 christian.bayart@allenovery.com Pieter De Koster Partner Tel +32 2 780 2210 pieter.dekoster@allenovery.com Inge Vanderreken Counsel Tel +32 2 780 2230 inge.vanderreken@allenovery.com Ilse Bosmans Senior Associate Tel +32 3 287 7421 ilse.bosmans@allenovery.com Vincent Vandenkerckhove Senior Associate Tel +32 2 780 2219 vincent.vandenkerckhove@allenovery.com Peter Van den Eynde Associate Tel +32 2 780 2213 peter.vandeneynde@allenovery.com Alexander Van Hoof Trainee Tel +32 2 780 2357 alexander.vanhoof@allenovery.com Aline Smits Trainee Tel +32 2 780 2660 aline.smits@allenovery.com Marie Schlögel Trainee Tel +32 2 780 2223 marie.schlogel@allenovery.com Allen & Overy LLP 2013
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