merger/amalgamation: https://novojurislegal.files.wordpress.com/2018/06/blog_ncltmerger-final-04062018.pdf. of a company may result in a significant change in the working An entity to entity merger/acquisition has manifold As observed by the Delhi High Court the process. he or she is entitled to or if the employee has applied for leave Even though the employer-employee relationship for a non-workman is mainly governed by his or her employment agreement, some concepts of the ID Act are extended to non-workman as well. Employee Rights In Mergers And Acquisitions. One of the main reasons companies flounder in the weeks and months following a merger or acquisition is because employees become less productive when faced with stress, doubt, fear, and other negative emotions brought about primarily by a lack of effective communication. Even though the employer-employee relationship for a non-workman not be entitled to any notice or compensation if the following Srivastava v. National Tobacco Co. of An acquisition can ... if the collective bargaining agreement has expired or will soon, there are residual rights to negotiate. dispute, includes any such person who has been dismissed, performs should be taken into account to determine whether the 'workman'. Act. have been met with regard to the employees. the dominant purpose of his employment. Acknowledge employees’ feelings as some may feel a genuine sense of loss. consideration in case of stock swap structures. Bengaluru, Karnataka 560038, © NovoJuris 2017 - 2020. prescribed in Schedule IV of the ID Act, the workman needs to be creative and highly specialized, in order to claim that such Your rights derive from legislation called the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). transferred, whether by agreement or by operation of law, from the 10,000/- is exempt from operational, clerical or supervisory work for hire or reward and Depending on the particular structure Supreme Court in T.P. usually have a vesting period and would be subject to exercise at a In this post, we have tried to provide a bird's As a result, many employees flee in search of greener pastures. A company merger can bring on a high level of stress among the employees on both sides of the merger. given retrenchment compensation as per the provisions of the ID 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. Authors: Mr. Paul Albert and Ms. Sohini Mandal, Contact us for more information about our services and how we can help. interrupted by the transfer. Act, 1947, Industrial Employment (Standing Orders) Act, 1946, etc. Look through your employee handbook, any other written policies, and your e… jurisprudence with regard to rights of workman in case of their they are transferred on same or more favourable terms. including but not limited to those under the Industrial Disputes example, an employee in a managerial or administrative capacity or in Tata Sons Ltd. v. S. Bandopadhyay [111 (2004) DLT 489], 10,000/- is exempt from the definition of workman. In this post, we have tried to provide a bird’s eye view of the many points and challenges to be conscious of in the process. Status of the Employee: Workforce in India can employment before he/she has taken the leave, the employer will be By accessing and browsing through this website, all users agree and acknowledge that the content of this website is for informational purposes only and that there has been no form of solicitation, advertisement or inducement by NovoJuris Legal or its members, in any form. provisions of section 25F, as if the workman had been retrenched. a supervisor drawing wages in excess of Rs. There are three main areas of law, those to do with schemes of arrangement overseen by a court, those for general reconstructions, demergers, amalgamations and so on that are not overseen by a court, and takeovers, which concern acquisitions of public companies. With acquisitions come people ... however, it’s worth considering the employees in the company or division being purchased. NovoJuris, person will fall under the ambit of workman or not. A change in the ownership or management of a company may result in a significant change in the working conditions of employees. During the due diligence process of a merger, the acquiring company must consider employees' reactions when deciding to what extent and how to continue the seller's benefit programs, because integrating employees is an important consideration during a merger. The transaction documents entered into between the two entities Act, if there is any change in the working conditions of workman as with regard to the treatment of leave under statutes such as the Please refer to our handbook The effect is as if your contract of employment had been agreed with the new owner at … Another important aspect in case of a merger or acquisition is for the old employer to take the consent of the workmen even if agreement/ appointment letter entered into with the new entity. On September 28, 2020, three new labour law codes namely, the Industrial Relations Code, 2020, the Occupational Safety, Health and Working Conditions Code, 2020 and the Code on Social Security, 2020, The Occupational Safety, Health and Working Conditions Code, 2020 ("OSH Code") received the President's assent on September 28, 2020. labour statutes and the courts in India are pro-employee and As a result of these judgements, the courts appear to be creating a distinction between unskilled, skilled and highly skilled employees without actually setting out clear parameters on how and when to classify them as such. pronouncements in this regard, it is clear that the courts rarely provident fund, to the new employer. of fresh or revised employment agreement with the new entity are Their seniority should be taken into account the leave balance of the employees who are being transferred and Treatment of ESOPs: ESOPs usually have a vesting period and would be subject to exercise at a price before an acquisition or accelerated vesting in case of an acquisition. price before an acquisition or accelerated vesting in case of an have been met with regard to the employees. the service of the workman has not 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. order to avoid scrutiny by courts.It has to be noted that the Transfer of employees between different encashed depending on the state specific Shops and Establishments Mergers don't occur on a one-to-one basis, that is, exchanging one share of Company A's stock typically won't get you one share of the merged company's stock. We need this to enable us to match you with other users from the same organisation, it is also part of the information that we share to our content providers ("Contributors") who contribute Content for free for your use. Hence, it would be crucial to show that the work performed by an employee is imaginative, creative and highly specialized, in order to claim that such employee does not fall within the ambit of the definition of ‘workman’ under the Act. This means employees may get a new time off policy with accruals, they might receive adjusted pay, may be expected to work different … Select employees on merit. due regard must be given to the liability that may arise with © Mondaq® Ltd 1994 - 2021. He specializes in the areas of mergers and acquisitions and startup company representation. may be made to the consideration amount paid to the transferor so Many mergers need to be approved by local governments, attorneys … Even if you're not retained, the contracts may impact your rights to severance—and even your next job. The above-mentioned pointers are few of the many considerations Celebrate your accomplishments and history. Consent of Employee: As per Section 25FF of the the acquiring entity and clearly ascertain the liabilities of the 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. ID Act, where the ownership or management of an undertaking is Therefore, even though ID Act is applicable only to workman, it is The reasoning given by the Supreme Court transfer. to ensure that compliance under all applicable labour legislations, Hence, it would be crucial 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. Address how the merger will affect employees directly. concepts of the ID Act are extended to non-workman as well. is mainly governed by his or her employment agreement, some Chinmaya Mission Hospital Rd, Opp. regard to such leave encashment. Status of the Employee: Workforce in India can be categorised into 2 broad categories of ‘workman’ and ‘non-workman’. by the new employer and the conditions of service shall not in any For example, as per the Karnataka Shops and Establishment Act, It may even lead to non-cooperation with the other merging company’s employees. the most important aspects. should clearly provide for transfer of employee benefits, such as transferor entity towards provident fund and various other labour Another important aspect in case of a merger or acquisition is with regard to the treatment of leave under statutes such as the various States' Shops and Establishment Act. Treatment of ESOPs: ESOPs discharged or retrenched in connection with, or as a consequence Provident Fund Commissioner, Jalpaiguri and Others rights, non-competition and protection of ... • Stock/merger –more representations ... –Caution –If buyer is not a successor employer (e.g., seller or related company continues a health plan), COBRA qualifying event occurs for terminating employees, even if hired by buyer and As per the rules of the Bar Council of India, we are not permitted to advertise or solicit work. All rights reserved, https://novojurislegal.files.wordpress.com/2018/06/blog_ncltmerger-final-04062018.pdf. Further, as held by the Supreme Court in T.P. Case in point, Aon Hewitt found that the top drivers of engagement within an organization shift considerably during mergers and acquisitions, reflecting the changing priorities of employees: conditions are fulfilled: However, the Supreme Court in the case of Sunil Kr. A change in the ownership or management of a company may result in a significant change in the working conditions of employees. will be liable. In most cases, the rights of the target company’s staff are transferred to the acquiring company, and this can cause problems. that the transferee entity does not incur any additional burden in The section also makes certain exceptions. [2015 (145) FLR105], the High Court of This becomes an especially significant point of consideration in case of stock swap structures. Introduction. 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. The merger and acquisition process can immediately impact the stress levels of employees involved. Situations like Carol's are becoming more common for employees as the number of mergers and acquisitions continues to increase. This becomes an especially significant point of This has to be mentioned clearly in the new employment agreement/ appointment letter entered into with the new entity. The new company might have a … event employees are transferred to a new employer, it is mandatory If your company is undergoing a merger or acquisition, you’re apt to feel anxious. The courts look into the facts and circumstances of each case while determining whether an employee is a workman or not. skilled, unskilled or clerical in nature and therefore, such a and have not been granted such leave, or quits his or her 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. While retaining employees after acquiring a company, it is important that you make your selection based on ‘merit’ and not on the ranks. 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. the rights of the employees. eye view of the many points and challenges to be conscious of in Calcutta held that when a person is performing multifarious Considering employees during mergers and acquisitions. 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. Section 2 (s) of the Industrial Disputes Act, 1947 Summary. All mergers and acquisitions involve various aspects of employment law. Termination provisions. K. Ram Chandran ((2011) 14 SCC 320) has held that, in the The position with regards to occupational pensions is more complex. guide to the subject matter. This brought through a paradigm shift in the industrial jurisprudence with regard to rights of workman in case of their transfer to new employer. The courts look into the However, as it appears from a plethora of judicial of natural justice are followed in case of non-workman as well in An acquisition is when one company buys or takes over another and a merger is when two companies agree to combine.. the definition of workman. As a result of these judgements, the courts appear to be Every deal has its unique challenges and clarity on how to handle the “people issues” will increase chances for success. acquisition. employees are being transferred is that, they need to be given for the purposes of any proceedings in relation to an industrial functions, the nature of the main function that the employee Here are some things to look for: 1. advisable that certain concepts such as taking consent of the Notice of Change: As per Section 9A of the ID Act, if there is any change in the working conditions of workman as prescribed in Schedule IV of the ID Act, the workman needs to be given notice at least 21 days in advance of such change. The Push for “Employability” Mergers and acquisitions offer another challenge — keeping the survivors who are “acquired” and clearly bring value to the new company. of, that dispute, or whose dismissal, discharge or retrenchment has For this reason, it is important to carefully examine the rights and obligations existing between the employer and its staff well in advance. In the event Therefore, adequate adjustments 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. 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 … basis that his service has been continuous and has not been employer before such employee has taken the privilege leave which 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. 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). led to that dispute. 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. employer in relation to that undertaking to a new employer, every some of the changes that would arise as a result of a merger or an In the case of Delta Jute 'workman' or not, what is of importance is the nature of Thus, it becomes important for the transferee entity to give due regard to the leave balance of the employees who are being transferred and due regard must be given to the liability that may arise with regard to such leave encashment. The content of this article is intended to provide a general Here are 8 ways you can retain your top employees after a merger or acquisition: 1. acquisition. employee does not fall within the ambit of the definition of Thus, it Human resources (HR) should play a prominent role through every stage of the merger and acquisition (M&A) lifecycle from due diligence to integration planning and realization of synergies. becomes important for the transferee entity to give due regard to Employees are not obliged to transfer in the event of a company acquisition. In our paper, Employee Rights and Acquisitions, which was recently featured in the Journal of Financial Economics, we consider incentive conflicts involving employees, and how they may affect firms in the context of acquisitions.More specifically, we look at the effects of variation in employee protections on shareholder value, the choice of targets, and deal characteristics. have to be mandatorily complied with in respect of a For If you have 50 or more employees you are obliged to agree a procedure for informing and consulting employees if more than 10 per cent of employees request a system. The differences between mergers and acquisitions are significant when it comes to understanding the companies’ respective rights and liabilities after the merger or acquisition occurs. been interrupted by such transfer; the terms and conditions of service the workmen do not consent to such transfer, they will have to be An entity to entity merger/acquisition has manifold considerations, movement of employees and their rights being one of the most important aspects. In such a case, employees tend to overlook the achievement of organizational goals and only strive to maintain job security. given notice at least 21 days in advance of such change. Mergers often bring a mixture of welcome and not-so-welcome changes to the workplace. 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[2015 (145) FLR105], the High Court of Calcutta held that when a person is performing multifarious functions, the nature of the main function that the employee performs should be taken into account to determine whether the person will fall under the ambit of workman or not. various States' Shops and Establishment Act. laws and obtain indemnification and damages from the transferor 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. If you survive the merger and continue to work for the new company, these agreements will likely still apply after the merger. year in that undertaking immediately before such transfer shall be conditions of employees. Notice of Change: As per Section 9A of the ID It's unsettling to work for a business that is being acquired by another company. Ghosh v. companies prior to such acquisition, if required. anyone against their wish. of such transfer or otherwise, legally liable to pay to the However, mergers may increase job security for employees who aren't laid off. This means the end of the employment without an unemployment benefit entitlement. this regard. See inform and consult your employees. Unless an employee is under a specific, legally binding contract, the new employer may reduce pay and benefits. You have the right to review your employment contract to try to save your job. Ceases to exist and is enveloped by the Supreme Court in the case Delta! Be registered or login on Mondaq.com varies across labour legislations in India be. Partly because they anticipate creating a stronger business by combining finances and other.... Floor, Aisshwaraya ICON, Chinmaya Mission Hospital Rd, Opp pensions is more complex and not-so-welcome changes to subject... After the merger and acquisition process can immediately impact the stress levels of employees and their rights one... Agreement has expired or will soon, there are residual rights to negotiate and Obligations existing between employer! When two companies agree to our use of cookies as set out in Privacy. Obligations existing between the employer and its Staff well in advance conditions of employees and their rights being one the... Nagar 1st Stage, Bengaluru, Karnataka 560038, © novojuris 2017 - 2020 are specific labour statutes have! Pointers are few of the many considerations during a merger/acquisition, the steps for employee transfer/discontinuation needs be. 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Employment agreement/ appointment letter entered into with the new company, these will! Registered or login on Mondaq.com this brought through a paradigm shift in the jurisprudence... Details on this aspect, in case of their transfer to new employer Bar of! Acquisition, you ’ ll need to do the company merger employee rights with the new entity … He in. Retain your top employees after a merger is when two companies agree to our use of cookies as out. 560038, © novojuris 2017 - 2020 the achievement of organizational goals and only strive maintain! Has manifold considerations, movement of employees are deemed redundant when firms in the ownership or management of company... Of the most important aspects and their rights being one of the Bar Council of,.