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21 November 2018
Many international corporate groups are looking at ways to reorganise their operations, not least in view of the United Kingdom's impending exit from the European Union. However, irrespective of Brexit, companies regularly seek ways to streamline their existing corporate structures and thus to increase efficiency within their business.(1)
Such cross-border corporate reorganisations almost always trigger questions relating to employment law. Depending on the respective project, work streams under employment law can play a significant role in meeting (or failing to meet) tight deadlines.
Foreign companies planning to transfer local business units to a domestic company must first resolve a number of issues. Since cross-border spin-offs are currently not regarded as feasible options, the transfer of assets and liabilities must be effected by way of an asset deal (for further details please see "Cross-border reorganisation – foreign companies with a local branch"). In Europe, this generally triggers a business transfer under local law (ie, the employment contracts of the staff within the unit in question are transferred to the domestic company).
However, if the unit in question is also to be relocated geographically, the desired objective will have been achieved only in part, since the accession of the domestic company to the employment contracts does not automatically mean that the individual terms of employment and, in particular, the relevant employees' place of work, will be altered. This place of work remains abroad unless the relevant employment contract provides otherwise.
If the local employees who were previously involved in a unit's business abroad are now to run this business (at least temporarily) from the domestic country as employees of the domestic company, it is necessary to conclude agreements to this effect.
It may also be necessary to bear in mind various aspects under residency, social security, tax and, in certain circumstances, co-determination law in this context (for further details please see the other articles in this series linked below).
Under these circumstances, a foreign company that is 'surrendering' employees may retain the right to issue instructions thereto. This would correspond to a matrix structure that is not uncommon in employment law and has already been adopted by many multinational corporate groups.
For further information on this topic please contact Hans-Peter Löw or Boris Blunck at Allen & Overy LLP by telephone (+49 69 2648 5000) or email (firstname.lastname@example.org or email@example.com). The Allen & Overy LLP website can be accessed at www.allenovery.com.
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