The scope and scale of the economic difficulties faced by major international businesses are unprecedented. All of the developed economies have experienced turbulence caused by declining demand and difficult credit markets, and corporations have had to look at restructuring businesses, including workforces, and reducing cost bases on a large scale.
There's no doubt that undertaking these exercises in European Union member countries can be challenging. For example, communications and consultation with employees are fraught with difficulty - particularly when key decision-makers operate outside the EU.
In all major EU jurisdictions, there is an obligation to consult unions or other employee representatives about substantial employee restructuring. In many countries, this will amount to an obligation to negotiate and reach agreement with representatives - a process often called co-determination rights.
Difficulties can arise where central management makes a statement or announcement which suggests that decisions have already been taken prior to the conclusion of formal consultation. Sometimes a desire to make a statement to the market and investors will conflict with the demands of employment law.
In the UK, for example, there are instances where unions have successfully challenged before the courts the integrity of consultation exercises where it is clear that an irreversible decision (eg, to close a site) has been made before consultation has taken place. Where an employer is in default in the UK, the penalty it faces is up to 13 weeks' pay for each employee in the affected business - effectively one-quarter of the annual payroll bill.
But in France, the consequences extend beyond civil law - executives can be guilty of a criminal offence for failing to comply with requirements to involve works councils before final decisions are taken. French and German law also require an employer to meet the costs of experts to assist works councils in deciding their response to an employer's proposal. The experts could, for example, analyse an employer's accounts to form a view as to whether the employer's economic rationale for proposed redundancies stacks up.
Most international corporations are now aware of the demands placed on them by diverse consultation obligations across Europe. The timing, content and nature of such obligations vary significantly. In France, collective consultation obligations are triggered when two peop