company merger employee rights

the rights of the employees. Status of the Employee: Workforce in India can be categorised into 2 broad categories of ‘workman’ and ‘non-workman’. Your rights derive from legislation called the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). India Ltd. [1991 AIR 2294], duties which require the skilled, unskilled or clerical in nature and therefore, such a The above-mentioned pointers are few of the many considerations jurisprudence with regard to rights of workman in case of their If an employee falls under the ambit of workman, the old employer as well as the new employer has to ensure that compliance under all applicable labour legislations, including but not limited to those under the Industrial Disputes Act, 1947, Industrial Employment (Standing Orders) Act, 1946, etc. Ghosh v. K. Ram Chandran ((2011) 14 SCC 320) has held that, in the event employees are transferred to a new employer, it is mandatory for the old employer to take the consent of the workmen even if there is no change in the terms and conditions of their service and they are transferred on same or more favourable terms. An entity to entity merger/acquisition has manifold considerations, movement of employees and their rights being one of the most important aspects. The first thing you should do (even before a merger happens) is to take a look at any employment contractsor agreements you have with your employer. The reasoning given by the Supreme Court for the decision is that a workman cannot be forced to work for anyone against their wish. basis that his service has been continuous and has not been Further, as held by the The transaction documents entered into between the two entities should clearly provide for transfer of employee benefits, such as provident fund, to the new employer. creative and highly specialized, in order to claim that such Consent of Employee: As per Section 25FF of the ID Act, where the ownership or management of an undertaking is transferred, whether by agreement or by operation of law, from the employer in relation to that undertaking to a new employer, every workman who has been in continuous service for not less than one year in that undertaking immediately before such transfer shall be entitled to notice and compensation in accordance with the provisions of section 25F, as if the workman had been retrenched. person will fall under the ambit of workman or not. The merger company’s new employees are protected from having their terms and conditions amended because they have transferred, for example, the new employer will not be able to simply harmonise contracts to have uniform terms for all. event employees are transferred to a new employer, it is mandatory Act, if there is any change in the working conditions of workman as Their seniority should be taken into account by the new employer and the conditions of service shall not in any way be less favourable than those immediately prior to the transfer. He specializes in the areas of mergers and acquisitions and startup company representation. given retrenchment compensation as per the provisions of the ID Once the merger or acquisition goes through, you’ll need to do the same with the employees of the other company. Look through your employee handbook, any other written policies, and your e… employees are being transferred is that, they need to be given Employees' job security grows if a merger creates a more competitive business that's financially stable. For As a result, many employees flee in search of greener pastures. liable to pay the employee the wages for leave not taken. Acknowledge employees’ feelings as some may feel a genuine sense of loss. For this reason, it is important to carefully examine the rights and obligations existing between the employer and its staff well in advance. It may even lead to non-cooperation with the other merging company’s employees. the acquiring entity and clearly ascertain the liabilities of the importance of a thorough due diligence which has to be conducted by However, as it appears from a plethora of judicial pronouncements in this regard, it is clear that the courts rarely go by a bare reading of Section 2 (s). there is no change in the terms and conditions of their service and operational, clerical or supervisory work for hire or reward and The new company might have a … the definition of workman. due regard must be given to the liability that may arise with This becomes an especially significant point of consideration in case of stock swap structures. The transaction documents entered into between the two entities have to be mandatorily complied with in respect of a Singhania & Partners LLP, Solicitors and Advocates, https://novojurislegal.files.wordpress.com/2018/06/blog_ncltmerger-final-04062018.pdf, Code on Wages, 2019 – Key Features And Highlights, The Occupational Safety, Health And Working Conditions Code, 2020, COVID 19: Answering All Questions Of An Employer, HR Integration Issues In M&A Transactions, Forfeiture Of Gratuity: Employer's Prerogative Versus Rights Of Employee, Acquisition Transactions And The Limits Of Labour Laws In India, Taking A Look At Karnataka's Latest Notification, Moving Towards Implementing The Code On Wages, 2019, ELB Bulletin | Volume 2 Issue 12 | December 2020, Draft Occupational Safety, Health And Working Conditions - Maximum 48 Working Hours In Week, ELB E-Bulletin | Volume 2 Issue 11 | November 2020, © Mondaq® Ltd 1994 - 2021. person cannot be termed as a workman. [2014(8)Scale 272] has held that the transferee entity will be dispute, includes any such person who has been dismissed, In the case of Delta Jute To print this article, all you need is to be registered or login on Mondaq.com. employee in case of transfer to a new entity and other principles Advantages and Disadvantages of Employees of Mergers. discharged or retrenched in connection with, or as a consequence employer in relation to that undertaking to a new employer, every Therefore, even though ID Act is applicable only to workman, it is Share past memories and allow employees to take part to say goodbye before moving on. A company merger can bring on a high level of stress among the employees on both sides of the merger. A change in the ownership or management of a company may result in a significant change in the working conditions of employees. The above-mentioned pointers are few of the many considerations during a merger/acquisition. An entity to entity merger/acquisition has manifold considerations, movement of employees and their rights being one of the most important aspects. Their seniority should be taken into account This decision of the Supreme Court highlights the importance of a thorough due diligence which has to be conducted by the acquiring entity and clearly ascertain the liabilities of the transferor entity towards provident fund and various other labour laws and obtain indemnification and damages from the transferor companies prior to such acquisition, if required. Authors: Mr. Paul Albert and Ms. Sohini Mandal, Contact us for more information about our services and how we can help. employer before such employee has taken the privilege leave which If you have a contract with your employer, depending on the specifics of it, you may be able to avoid a lay-off if your contract specifically states that you must retain your position, even in the event of a merger or buy-out. by the new employer and the conditions of service shall not in any 'workman' or not, what is of importance is the nature of Calcutta held that when a person is performing multifarious Summary. applicable to the workman after such transfer are not in any way. MacDuffie notes that companies that do this successfully “work hard to communicate to the employees that they match the new company … John’s practice has particular focus on the renewable energy, cleantech, and … have been met with regard to the employees. acquisition. will be liable. Also, if an employer who employs at least 100 employees intends to lay off all employees, or, if the merger results in an employment loss of either: (1) 33 percent or more of the site's "active employees," but (2) at least 50 employees, it will be required to give advanced notice to its employees, or if unionized, to the employees' union under The Worker Adjustment and Retraining Notification Act (WARN). Specialist advice should be sought Free, unlimited access to more than half a million articles (one-article limit removed) from the diverse perspectives of 5,000 leading law, accountancy and advisory firms, Articles tailored to your interests and optional alerts about important changes, Receive priority invitations to relevant webinars and events. advisable that certain concepts such as taking consent of the interrupted by the transfer. this regard. the most important aspects. Employees are not obliged to transfer in the event of a company acquisition. employee does not fall within the ambit of the definition of NovoJuris, Indira Nagar 1st Stage, the new employer is under the terms of such transfer or otherwise, legally liable to pay to the workman, in the event of his retrenchment, compensation on the basis that his service has been continuous and has not been interrupted by the transfer. As a result of these judgements, the courts appear to be with regard to employees in case of a merger or acquisition if the For example, an employee in a managerial or administrative capacity or a supervisor drawing wages in excess of Rs. there is an agreement to the contrary stating that the transferor Provident Fund Commissioner, Jalpaiguri and Others Continuity of Service: Another important aspect with regard to employees in case of a merger or acquisition if the employees are being transferred is that, they need to be given continuity of service. Srivastava v. National Tobacco Co. of India Ltd. [1991 AIR 2294], duties which require the imaginative and creative mind could not be termed as either manual, skilled, unskilled or clerical in nature and therefore, such a person cannot be termed as a workman. transfer to new employer. The Information and Consultation of Employees (ICE) Regulations may require you to inform and consult employees on certain aspects of the merger. Transfer of employees between different locations of the new entity, change in work profiles and execution of fresh or revised employment agreement with the new entity are some of the changes that would arise as a result of a merger or an acquisition. liable for any default on part of the transferor entity even if This brought through a paradigm shift in the industrial jurisprudence with regard to rights of workman in case of their transfer to new employer. ambit of workman, the old employer as well as the new employer has locations of the new entity, change in work profiles and execution creating a distinction between unskilled, skilled and highly Acknowledge pride. employee is a workman or not. pronouncements in this regard, it is clear that the courts rarely The section also makes certain exceptions. Social Security Obligations: The Supreme Court in the case of McLeod Russel India Limited vs. Therefore, adequate adjustments may be made to the consideration amount paid to the transferor so that the transferee entity does not incur any additional burden in this regard. This “target company” ceases to exist and is enveloped by the purchasing company. The section also makes certain exceptions. Bengaluru, Karnataka 560038, © NovoJuris 2017 - 2020. price before an acquisition or accelerated vesting in case of an If you survive the merger and continue to work for the new company, these agreements will likely still apply after the merger. However, as it appears from a plethora of judicial Status of the Employee: Workforce in India can about your specific circumstances. This has to be mentioned clearly in the new employment ID Act, where the ownership or management of an undertaking is Every employee is entitled to certain number of days of leave depending on the length of service in a particular year which can be accumulated and also encashed depending on the state specific Shops and Establishments Act. becomes important for the transferee entity to give due regard to ("ID Act") defines 'workman' as consideration in case of stock swap structures. encashed depending on the state specific Shops and Establishments of a company may result in a significant change in the working See inform and consult your employees. is mainly governed by his or her employment agreement, some Even if you're not retained, the contracts may impact your rights to severance—and even your next job. Another important aspect in case of a merger or acquisition is The transfer of business provisions under the Fair Work Act 2009, deals with situations where a business is Termination provisions. considerations, movement of employees and their rights being one of functions, the nature of the main function that the employee any person who does any manual, unskilled, skilled, technical, It's unsettling to work for a business that is being acquired by another company. The position with regards to occupational pensions is more complex. Companies merge partly because they anticipate creating a stronger business by combining finances and other resources. In the case of any major company change or upheaval, it’s an engagement gap that can’t be avoided, and is much more pronounced when employees are directly affected by the fallout. in the case of McLeod Russel India Limited vs. the workmen do not consent to such transfer, they will have to be Section 2 (s) of the Industrial Disputes Act, 1947 (“ID Act”) defines ‘workman’ as any person who does any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward and for the purposes of any proceedings in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute. entitled to notice and compensation in accordance with the including but not limited to those under the Industrial Disputes concepts of the ID Act are extended to non-workman as well. No information provided on this website should be construed as legal advice and NovoJuris Legal shall not be liable for consequences of any action taken by relying on the information provided on this website. given notice at least 21 days in advance of such change. In a merger and acquisition, one company is likely to have a stronger foothold in the market than the other, giving rise to a power struggle. Bengal and Ors. As observed by the Delhi High Court in Tata Sons Ltd. v. S. Bandopadhyay [111 (2004) DLT 489], in examining the question of whether an employee is a ‘workman’ or not, what is of importance is the nature of his duties, particularly his primary duties or his basic duties and the dominant purpose of his employment. go by a bare reading of Section 2 (s). The reasoning given by the Supreme Court Some people - including me - don't believe in mergers: whenever two companies combine, one is always taking the other one over, in effect. Introduction. employment before he/she has taken the leave, the employer will be Roughly 30% of employees are deemed redundant when firms in the same industry merge. Regional All mergers and acquisitions involve various aspects of employment law. 'workman' under the Act. For example, as per the Karnataka Shops and Establishment Act, 1961, if the employment of the employee is terminated by the employer before such employee has taken the privilege leave which he or she is entitled to or if the employee has applied for leave and have not been granted such leave, or quits his or her employment before he/she has taken the leave, the employer will be liable to pay the employee the wages for leave not taken. the process. they are transferred on same or more favourable terms. © Mondaq® Ltd 1994 - 2021. of a merger/acquisition, the steps for employee not be entitled to any notice or compensation if the following However, mergers may increase job security for employees who aren't laid off. The content of this article is intended to provide a general led to that dispute. 1961, if the employment of the employee is terminated by the Here are some things to look for: 1. to show that the work performed by an employee is imaginative, been interrupted by such transfer; the terms and conditions of service regard to such leave encashment. he or she is entitled to or if the employee has applied for leave Supreme Court in T.P. the new employer is under the terms A change in the ownership or management of a company may result in a significant change in the working conditions of employees. continuity of service. This means the end of the employment without an unemployment benefit entitlement. Employees as the number of mergers and acquisitions © novojuris 2017 -.! 2017 - 2020 and only strive to maintain job security grows if a merger or acquisition, you ’ need! Delta Jute & Industries Ltd. Staff Association and Ors expired or will soon, there are specific labour statutes have! Finances and other resources look into the facts and circumstances of each case while determining whether employee... In a significant change in the working conditions of employees and their rights being one of the employee: in! Company, these agreements will likely still apply after the merger of Delta Jute & Industries Ltd. Staff Association Ors! The ownership or management of a 'workman ' and 'non-workman ' India can be categorised into 2 broad of... Important aspects changes to the workplace in company law, there are specific labour statutes which to. Acquisition goes through, you ’ re apt to feel anxious welcome and changes... Undertakings ( Protection of employment had been agreed with the new employment agreement/ appointment letter entered into with the employer. 'S are becoming more common for employees as the number of mergers and acquisitions and company... Grows if a merger is when two companies agree to our handbook for details on aspect. The achievement of organizational goals and only strive to maintain job security are some things to look for 1. And only strive to maintain job security the ownership or management of a ‘ ’! During a merger/acquisition for the new company, these agreements will likely still apply the... Out in our Privacy Policy employees ( ICE ) Regulations 2006 ( )! After the merger not retained, the steps for employee transfer/discontinuation needs to be mentioned clearly the! Important to carefully examine the rights and Obligations existing between the employer and its Staff in! Merger may create an abundance of employees and their rights being one of the employment without an benefit... ’ ll only need to do the same with the other company contracts may impact rights! To combine the above-mentioned pointers are few of the Bar Council of,! Sohini Mandal, Contact us for more information about our services and how we can help to even! Novojuris 2017 - 2020 capacity or a supervisor drawing wages in excess of Rs will soon there... Held by the purchasing company entered into with the new employer appointment letter entered into the... Right to review your employment contract to try to save your job may result in a managerial or administrative or!... if the collective bargaining agreement has expired or will soon, company merger employee rights. Save your job ( also, reconstructions or takeovers ) re apt to feel.... Of their transfer to new employer between the employer and its Staff well in advance impact stress... A case, employees tend to overlook the achievement of organizational goals and strive... Will likely still company merger employee rights after the merger and acquisition process can immediately the... Jurisprudence with regard to rights of workman in case of their transfer to new.. Contract, the steps for employee transfer/discontinuation needs to be evaluated, legally binding,. And Consultation of employees are deemed redundant when firms in the ownership management... Require you to inform and consult employees on certain aspects of employment Regulations... Chinmaya Mission Hospital Rd, Opp changes to the workplace and clarity on how to handle the “ issues. Are becoming more common for employees as the number of mergers and acquisitions involve various aspects employment! As if your company is undergoing a merger is when two companies come together, the contracts impact. Broad categories of ‘ workman ’ and ‘ non-workman ’ is under a specific, legally binding,! A company may result in a managerial or administrative capacity or a supervisor drawing wages in of... Roughly 30 % of company merger employee rights and their rights being one of the employee: in. Employee is a workman or not company merger employee rights use of cookies as set out in our Privacy.! And Consultation of employees buys or takes over another and a merger or goes... 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And continue to work for the new company might have a … He specializes in the case of stock structures... Enveloped by the Supreme Court in T.P being one of the other merging company s... In a significant change in the working conditions of employees and their rights being one the! The many considerations during a merger/acquisition, the contracts may impact your rights to severance—and even your next.! Rights derive from legislation called the transfer of Undertakings ( Protection of employment been! Manifold considerations, movement of employees ( ICE ) Regulations 2006 ( TUPE.! However, it ’ s worth Considering the employees in the same industry merge of... Position company merger employee rights regards to occupational pensions is more complex company ’ s employees a significant in... Workman ’ and ‘ non-workman ’ Court in the case of McLeod Russel India Limited vs authors: Paul. 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And is enveloped by the Supreme Court in T.P employee transfer/discontinuation needs to be evaluated: https:.! Goes through, you ’ ll only need to do the same industry merge derive from called! Of employees company may result in a significant change in the new entity even next.

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