Prisoners of Akavan: Decision Sheds Light on EU Requirement for Pre-Layoff Union Consultation

Christian Berg has a problem. As an employment lawyer who is of counsel to Squire Sanders' Frankfurt office, Berg is working on a transaction involving the Japanese purchase of an enterprise that spans 18 jurisdictions, many of them in the European Union.

Naturally, the purchaser is thinking about cost efficiencies including mass layoffs, known as "collective redundancies" in the EU. And while the master purchase agreement remains unsigned and no formal decision has been made, Berg needs to consider whether the time has come for the vendor or the purchaser to consult with the affected workers councils (unions) about the justification for any job losses.

On that same day, the subsidiary FSC proposed employee consultations, which took place between Dec. 20, 1999, and Jan. 31, 2000. On Feb. 1, 2000, the FSC board decided to close most of the company's operations in Finland. The company dismissed a majority of its employees on or after
Feb. 8, 2000.

The unions applied to the Finnish court for a declaration that FSC had failed to consult in time. They argued that BV's board had made the final decision on Dec. 14, before the company engaged the employees, thereby depriving them of their right to weigh in about whether the layoffs were necessary.

The difficulty is that the meaning of "contemplating collective redundancies" remains elastic, even in light of Akavan.

"The decision almost goes so far as to say that mere discussion of strategic issues can give rise to consultation rights, perhaps even before the parent has something concrete to talk about with the subsidiary," Petersen says.


Julius Melnitzer

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