ARD Times - Review of Employment Issues in Outsourcing in ...media.mofo.com/files/uploads/Images/130617-ARD-Times.pdf• Broad experience in IT and business process outsourcing •

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ARD Times - Review of Employment Issues in

Outsourcing in Key European Countries

Outsourcing Law Group17 June 2013

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One of the largest law firms in the world, with a unique technology focus

Full, first-tier service on sourcing projects in the United States, Europe and Asia

Using a collaborative style to create enduring outsourcing relationships

Client-focused ethos and global geographic reach

• With over 1,000 lawyers in 16 global offices, MoFo is one of the top 25 global law firms

• MoFo has a clear focus on technology law, the technology sector and complex services-based projects

• 60 specialist technology and outsourcing lawyers offer flexible, scalable resource on all types of technology and outsourcing projects

• Projects include outsourcings for large government agencies (H.M. Revenue & Customs (U.K.), State of Georgia), banks (Lloyds Banking Group, Bank of America), manufacturers (Novartis), technology businesses (McKesson, Amadeus)

Key contact:

Alistair Maughan

T: (+44) 20 7920 4066

E: [email protected]

Morrison & Foerster ‐ UK

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The Outsourcing Law Group (OLG) is a group of like-minded law firms, each with asubstantial outsourcing practice and a recognised market leader in the sector

On outsourcing projects, the OLG works as a single law firm, taking a unifiedapproach under the leadership of one firm, and providing one set of rates, one billand one currency

OLG leverages the joint resources of all OLG firms and staffs projects with theresources that have the most relevant competencies for each aspect of a project

OLG currently consists of:

Morrison & Foerster: USA, UK and Asia

Noerr: Germany, Central and Eastern Europe

Gorrissen Federspiel: Denmark

Kennedy van der Laan: Netherlands

Courtois Lebel: France

Orsingher Ortu – Avvocati Associati: Italy

What is the Outsourcing Law Group?

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Worldwide coverageLocal knowledge

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Europe-wide Themes

Rules for determining whether ARD applies to outsourcing

Selection of in‐scope staff and the problem of cherry‐picking

Pre‐ARD consultation required: timeframes and penalties

Employees’ rights to object to transfer

Post‐ARD changes to terms of employment

Data transfer in “second generation” outsourcing

Local law exceptions exist to the general ARD principles

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Question 1

Are there separate rules for determining whether ARD applies to outsourcing, or do general principles of business transfers apply?

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One of the largest law firms in the world, with a unique technology focus

Full, first-tier service on sourcing projects in the United States, Europe and Asia

Using a collaborative style to create enduring outsourcing relationships

Client-focused ethos and global geographic reach

• Ann Bevitt heads our UK Employment Law Group. Ann’s practice covers all aspects of employment law, with a focus on outsourcing, international re-organisations and corporate transactions.

• Ann’s experience includes: advising HMRC on the employment and human resources issues arising out of its technology outsourcing and re-procurement project, involving the TUPE transfer of 3,000 staff; advising Phoenix Group on the employment and human resources aspects of the outsourcing of its life insurance and pensions administration services; and advising Johnson & Johnson on the employment and privacy law aspects of its HR outsourcing).

Morrison & Foerster - UK

Key contact:

Ann Bevitt

T: (+44) 20 7920 4041


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Service provision change: where contract to provide client with business service is:

Question 1 – United Kingdom

or or

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Recognized expertise in particular on collective employment issues and company restructuring

Enabling clients to implement successful strategic projects

Advice in all the main areas of business law affecting outsourcing projects

Providing assistance with high added value, focused on the needs of our clients

• For over 40 years, Courtois Lebel offers its national and international clients a wide range of legal services in the key areas of business law.

• Courtois Lebel has expanded its areas of expertise in order to offer its clients comprehensive pragmatic solutions, both in legal advice and litigation.

• Courtois Lebel has strong links and shared background with major European consultancies.

• Courtois Lebel has an significant experience of the execution of major outsourcing projects for clients, in France and internationally,

Courtois Lebel - France

Key contact:

Kim Campion – Partner

Employment

T: (+33) 1 58 44 92 70


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Question 1 – France

Standard ARD provisions apply to outsourcing

Notion of autonomous economic entity

Any asset deal that triggers a business transfer

Specific Collective Bargaining Agreement provisions in certain industries (e.g. cleaning industry)

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Focused on technology outsourcing as a core market

Significant international capacity: with 60% of clients from outside Italy

Accessible, available, responsive and reliable: offices in Rome and Milan

Rated top tier on major directories in Intellectual Property, Information Technology, Telecommunications and Media

• Italian leader in Telecoms, Media and Sourcing

• Focused Technology sector group with significant experience of outsourcing and access to a wider full-service practice familiar with issues affecting the Technology sector

• A young and dynamic team

Orsingher Ortu - Avvocati Associati - Italy

Key contact:

Marco Consonni

T: (+39) 02 89075071


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Question 1 – Italy

Italian case law has pointed out that there is a transfer of business (or branch of businesses) only when there the transferred “functions” / “services” where pre‐existing to the transfer and when they were functionally autonomous within the transferor before the transaction.

If this pre‐existing element does not exist, it is more likely than transferor and transferee have executed a mere service contract which doesn’t legitimate the transfer of employees with the mechanism of the ARD (i.e. automatically)

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Question 2

We often see disagreements about which employees ought to transfer (especially in 2nd generation projects). How does the scope of ARD implementing legislation affect who transfers, or the ability to cherry‐pick good staff/dump bad staff?

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One firm, multiple perspectives

Consistent dedication to quality and understanding of our clients' needs

An integrated firm with more than 220 lawyers

Covering all branches of Danish and EU commercial law

• Gorrissen Federspiel is based in Copenhagen and Aarhus, has 226 lawyers, 44 partners and is one of the leading corporate law firms in the Nordics

• Broad experience of employment issues related to IT and business process outsourcing in Denmark and abroad

• Has advised on many of Denmark and the other Nordic region’s largest and most complex outsourcing transactions involving employees

Gorrisen Federspiel - Denmark

Key contact:

Jacob Sand

T: (+45) 86 20 74 04


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Question 2 – Denmark

All employees who are predominantly engaged in the outsourced business on the transfer date will transfer

No ARD legislation preventing cherry picking

The current provider may (within the right of management) transfer good staff/ bad staff to/from the outsourced business before the transfer date

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Contractual obligations to avoid cherry picking:

No changes to the work force within a reasonable time before the transfer date

Requirement to provide a list of the employees in scope at certain intervals before the transfer date

Definition of transferring employees, e.g. employees who have been actively working for the current provider within the last three months before the transfer date (to avoid the transfer of employees on long‐term sick leave, maternity leave etc.)

A pre‐determined list of retained/transferring employees

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Terminations as a way to affect the in‐scope employees

The employees who are dismissed and released from all duties before the effective transfer date will not transfer

How to avoid the risk of rightful claims for unfair termination?

Contractual obligation to terminate/release re‐transferring employees within a certain period of time before the end date

Who should defray the costs of the terminations and who should bear the risk of claims for unfair termination?

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One of the top 20 independent law firms in the Netherlands

More than half of the firm’s work is for international clients

Top tier in many practice areas with a strong focus on technology and employment law

Innovative, open, friendly, informal and totally engaged with clients

• The leading IT firm in the Netherlands

• Innovative out-of-the-box thinking and entrepreneurial savvy

• Broad experience in IT and business process outsourcing

• Our outsourcing team supports in all aspects of outsourcing: drafting, negotiating of the agreement(s) and all HR-related aspects.

Kennedy Van der Laan – The Netherlands

Key contact:

Soo-ja Schijf

T: (+31) 20 5506 832


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Question 2 – Netherlands

Who transfers and who does not?

Agency workers: do not transfer

Suspended employees: under certain circumstances, do not transfer

Ill employees: in principle, do transfer

Redundant employees: in principle, do not transfer

Managing Directors: only transfer as an employee (but directorship does not transfer)

Employees working for more than 1 BU: only if employee can be ‘allocated’ to transferring BU

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Permanently seconded employees (Heineken vs. Albron)

Supreme Court (5 April 2013): permanently seconded employees within Heineken‐Group transfer by operation of law to Albron.

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The transfer is automatic and by operation of law

No possibility to choose who will transfer or not

No right of option for employees either

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• A Europe-wide established employment law team with pre-eminent know-how and reputation

• Well-suited to handling highly sophisticated international transactions

• Close interaction with internal practice groups and industry teams, e.g. outsourcing

• Long track record of outsourcing projects in a wide range of sectors

Among Germany’s leading independent law firms with 450 lawyers

Experience of more than 100 often highly complex outsourcing projects

Excellent presence in CEE: offices in Warsaw, Prague, Moscow, Bucharest, Budapest and Bratislava

Most innovative German law firm - Financial TimesInnovative Lawyers

Noerr – Germany and CEE

Key contact:

Daniel Krannich

T: (+49) 69 971477331


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Question 2 – Germany

Basically all employees of the affected business unit will be transferred

No cherry‐picking possible

But: prior to the transfer, various possibilities to shape the unit that will be transferred

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Question 3

There is often confusion among outsourcing clients about the extent of pre-ARD consultation required: e.g., timeframes, with whom and penalties for failing to consult. How much variation is there across Europe? In which countries do Works Councils have particularly great influence?

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The German implementation of the ARD does not require consultation, just obligation to provide information to the employees

Information of the employees pursuant to Sect. 613a para. 5 German Civil Code

infringement does not inhibit transfer

Transfer of a part of the unit (Outsourcing): severe codetermination rights for the works council pursuant to Sect. 111 Works Constitution Act

applicable to companies with more than 20 employees

operational change

infringement may result in a fine (up to 10,000 €) and the transfer can be inhibited by the works council prohibitory injunction enforced by penalty (up to 250,000 €)

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Notice of the transfer of business must be given 25 days in advance by written communication to labour organizations

The duty of disclosure is imposed upon both the transferor and the transferee

Subjects legitimated to receive the information are the Company Union Representatives (Rappresentanze Sindacali Aziendali) of the legal entities involved and the respective Trade Associations (Associazioni di Categoria) of both companies (transferor and transferee)

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If there are no Company Union Representatives, the information has to be given to the Trade Associations joining the national trade Federations which are the “most representative”

Communications to Trade Associations may be sent through the trade union to which the Trade Associations are joined or to which they grant mandate

Communications are necessary only if the company has more than 15 employees. This number has to be calculated on the entire company, even though the transfer concerns only part of it

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With the communication, the parties must indicate:

a) the reasons of the programmed transfer of business;

b) the juridical, economical and social consequences for the employees (i.e. modification of the applicable collective labour agreement);

c) the eventual measures both the transferor and the transferee intend to take towards the employees (i.e. suspension of labour relations and recourse to the redundancy fund etc.

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If the communication is omitted, both parties may incur the sanction provided for an “anti union behaviour”(condotta antisindacale) which may led to criminal sanction if not cured

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Question 3 – NetherlandsConsultation: Works Council (right to advice)

Timing? When the advice can (still) have important influence on the decision‐process

Information? Reasons for proposed outsourcing, consequences for the employees and measures to be taken

Impact advice? If advice of WC is not followed (completely), a waiting period of 1 month applies during which WC can initiate a Court procedure

Court criterion? Balancing of interests: reasonable decision

Court measures? Withdrawal of decision / reversal of consequences or a prohibition to implement the decision

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Consultation required in presence of works council

No direct consultation of employees (information)

Consultation must be launched well in advance

The works council is supposed to give an opinion on the outsourcing project: this is not an agreement

The works council can delay the project

Failure to consult: fines of €3,750 and 1 year prison for individuals and €18,750 for companies

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No fixed timeframes ‐ in reasonable time before the transfer date. In practice, just up to a couple of days before the transfer

Information and consultation must be made with the employee representatives (Works Council) or the employees if no representatives are elected

Penalties: subject to a fine under statutory law or applicable collective bargaining agreement

Contractual obligation on both parties to inform and consult

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Information obligation:

When? ‐ long enough before a transfer to enable the transferor/transferee to consult the appropriate representatives of affected employees

What on? ‐ fact of transfer, approximately when transfer will take place, reasons for transfer, legal economic and social implications of transfer for affected employees, measures envisaged in connection with transfer (or if none, that fact)

Consultation obligation:

When? ‐ where transferor/transferee envisages that it will, in connection with the transfer, be taking measures in relation to affected employees

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Consultation obligation (ctd):

What on? ‐measures to be taken in relation to affected employees

How? ‐ with a view to seeking agreement to measures to be taken

Penalties for failure to inform and consult employee representatives:

Protective awards of up to 13 weeks’ actual pay per employee

Transferor and transferee to be jointly and severally liable

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Question 4

What rights do employees have to object to transfer?

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In the event of a business transfer, Section 2112 of the Italian Civil Code provides that employment relationships pass on from the transferring party to the transferee party without possibility of choice

In the event of transfer of only a portion of the business (transfer of a branch of business), the determination of the employees to be transferred must be effected on the basis of assignability or less of their work activity to the branch the subject of assignment

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Employees may contest the business transfer if there was not a going concern having its own autonomy and proper functionality before the transfer. In which case, it is more frequent that the companies have entered into a simple service contract and not a business transfer. This may be assessed on a case‐by‐case basis.

In this case, the employees may oppose the transfer and remain with the transferor

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Sect. 613a para. 6 BGB

objecting without stating reason within one month

one‐month‐term starts when being informed completely and correctly

Legal requirements (Sect. 613a para. 5 BGB):

(estimated) date and the reason of the transfer

the legal, economic and social consequences of transfer

envisaged measures concerning the employees

Supplementary jurisdiction concerning the correct information

if not correctly informed: right to object is unlimited in time

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No right to object

Only solution for the employee is to resign

Right to challenge the transfer (and most probably the absence of transfer)

Employee can bring a claim at his/her choice against the transferor or the transferee, or even both of them in certain circumstances

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Employees have right to object to transfer

If they do so, contracts of employment and rights, powers, duties and liabilities under or in connection with them will not transfer

Employment with transferor is treated as terminated by operation of law with effect from transfer date, but not deemed to be a dismissal

No entitlement to statutory or contractual compensation unless objection in response to employer's repudiatory breach or substantial change to working conditions to material detriment

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Question 5

To what extent are incoming employers allowed to make changes to, or harmonization of, employee terms of employment once an ARD transfer has occurred?

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Question 5 – Netherlands General principle: employment terms transfer automatically

and employee cannot waive his rights under ARD (ECJ 10 February 1988, Daddy’s Dance Hall)

Harmonization by mutual consent can be possible, if : ETO reasons

duty to inform employees about transfer and consequences

new employment offer of incoming employer must also contain the possibility to retain the employment conditions of former employer

risk of non‐compliance: employee remains entitled to former employment conditions (and risk of ‘cherry‐picking’)

Unilateral harmonization under general principles of Dutch law

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The employment terms are automatically transferred to the incoming employer.

A material change is only possible under general principles of employment law – requires a notice corresponding to the notice of termination or agreement

The incoming employer is considered as having adopted any applicable collective bargaining agreements unless a notice on no‐adoption is given to the unions as a general rule within 3 weeks after the transfer date

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impossible if done unilaterally by the employer

can be done mutually with the respective contracting party (e.g., employees, union, works council)

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Incoming employer cannot harmonize Ts&Cs because of, or in connection with, an ARD transfer

Only minor harmonisations are permitted (e.g., those that do not affect the employment contract: small changes of working conditions)

Changes can be made with the employee’s approval only if these changes affect the employment contract

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Changes to terms and conditions in connection with transfer automatically unfair/invalid if sole/principal reason for dismissal/change is: transfer; or

reason connected with transfer other than ETO reason entailing changes in workforce (number or functions)

ETO: no statutory definition, but likely to include:

reason relating to profitability or market performance of transferee’s business (economic reason)

reason relating to nature of equipment or production processes which transferee operates (technical reason)

reason relating to management or organisational structure of transferee’s business (organisational reason)

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Question 6

In practice, we often see more issues around “second generation” outsourcing e.g. new Service Provider getting HR information from old Service Provider, scope of employees transferring. How well are these issues dealt with under your law?

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Question 6 – United Kingdom At least two weeks before transfer, transferor must

provide transferee with “employee liability information”: identity

age

statutory employment particulars

information relating to collective agreements

instances of any disciplinary action and grievances in last two years covered by the statutory dispute resolution procedures

instances of legal action taken by employees against the customer or outgoing service provider in the last two years

instances of potential legal actions where the customer or outgoing service provider has reasonable grounds to believe such action might occur

Minimum sanction of £500 (no maximum) for each employee for whom information not provided

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General principles of law requires the old service provider to act loyally in connection with end date

Contractual obligations are recommendable in connection with transfer of HR info:

Obligation for the old provider to provide HR info 3‐6 months before the end date and updated HR info at later intervals including on the end date

The HR info should minimum include: seniority, age, position, salary (incl. pension and benefits), notice of termination, special conditions and any collective agreement

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HR info is subject to data protection requirements:

Non‐sensitive data can usually be disclosed to potential providers without consent if subject to confidentiality.

On the transfer date, all HR info can be transferred to the new provider based on a succession principle

Other recommended contractual obligations in relation to 2nd generation outsourcing:

No implementation of favourable terms of employment

No transfer or allocation of additional resources

No offerings and inducements to the re‐transferring employees

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Question 7

Do any local law exceptions exist to the general ARD principles e.g. minimum thresholds?

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In certain industries, specific Collective Bargaining Agreements exist, which would allow a transfer, even if the ARD conditions are not met

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Collective Bargaining Agreements in certain industries provide for ‘change of contract’ clause (e.g. cleaning industry)

Duty by new supplier to offer the cleaning employees an employment agreement

In case the major part of the cleaning staff accepts the employment proposal and cleaning is regarded as labour‐intensive work, this will trigger a transfer under the ARD‐principles.

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MoFo is one of the leading international law firms, with more than 1,000 lawyers in 16 offices in Europe, Asia and the United States. Our clients include some of the largest financial institutions, corporations and government agencies

We have had an office in London since 1980. Today, our London office includes 16 partners and 55 lawyers – and focuses on technology & outsourcing, corporate, litigation and finance projects

Technology and outsourcing are key MoFo strengths. We act for technology businesses such as Apple and Intel in their global operations, and for large organizations such as Lloyds Bank, Novartis and the UK government in their technology and outsourcing projects

Chambers has called MoFo “the premier IT firm in the World”

For more information, see http://www.mofo.com/outsourcing‐services/ or our tech blog http://www.mofotechblog.com/

Morrison & FoersterA leading international technology and outsourcing adviser

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Courtois Lebel is in the top 5 of the independent firms in the Technology field (Legal 500).

We act for both technology businesses such as Logica (CGI), Sopra Consulting and SAS Institute (the Business Intelligence leading company) and leading French companies such as Aviva, BNPP, Lafarge, Natixis, etc.

Courtois Lebel has more than twenty years of experience in this area. The firm has one of France’s largest technology and outsourcing teams with 10 lawyers, including 3 partners

The DNA of the IT & telecommunications department is in its capacity to understand and give a legal classification of a technical and operational situation that is often complex.

The team has developed dedicated tools and methodologies for use by and on behalf of its clients

Courtois LebelA leading French technology and outsourcing adviser

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Gorrissen Federspiel is based in Copenhagen, has 225 lawyers, 41 partners and is one of the leading corporate law firms in the Nordics

Gorrissen Federspiel has the only fully dedicated outsourcing team in the Nordic region and is generally recognised as the leading outsourcing practice. The team consists of 1 partner, 3 project lead attorneys, 1 attorney, and 2 junior associates. Most of the lawyers in the outsourcing team are ITIL v3 foundation certified

The practice is based on large‐scale international projects and deals primarily with cross‐border transactions, often with no domestic or Nordic tieTeam lead, Ole Horsfeldt, is author of IT Outsourcing, published by Thomson, the only legal and practical book on outsourcing published in the Nordics, and has for several years been chairman of ITechLaw’s outsourcing committee. Ole Horsfeldt is part of IAOP’s Nordic leadership

Gorrissen FederspielThe leading practice in the Nordics

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Kennedy Van der Laan is Dutch law firm with an international focus. The firm is based in Amsterdam, has 95 lawyers and civil notaries and 25 partners. Chambers Europe describes the firm as “Kennedy Van der Laan is one of the Netherlands top independent law firms, based in Amsterdam. The firm has excellent legal knowledge in all avenues of work, offers prompt and practical advice, deals with legal issues and creates the right solutions in an unconventional and socially responsible way.”

Kennedy Van der Laan is leading in technology and outsourcing in The Netherlands with more than twenty years of experience in this area. The firm has the largest technology and outsourcing team with 20 lawyers, including 6 partners.

The practice covers both IT outsourcing and BP outsourcing (incl. HR service, financial services and facilities). The majority of the clients are AEX listed multinationals in areas like banking, insurance, retail and industry. The firm also supports some selected providers of outsourcing services.

The lead partners of the outsourcing practice, Patrick Wit, Reinoud Westerdijk and Joost Linnemann, are all recognized as among the best technology and outsourcing lawyers in the country. Reinoud Westerdijk is a member of the board of ITechLaw. Patrick Wit is the legal member of the program committee of the Dutch Outsourcing Platform.

Kennedy Van der LaanThe leading technology and outsourcing practice in The Netherlands

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Noerr has grown to become Germany’s leading independent law firm with 15 offices across Germany and the CEE/CIS region, with additional locations in Alicante, London and New York City. Starting out in Munich in 1950, Noerr today is a full‐service law firm with its own distinctive style and culture, and widely recognized for providing interdisciplinary advice and quality services responsive to the needs of its national and international clients.

Noerr’s preeminent IT group has in‐depth knowledge and expertise in handling licensing, procurement, outsourcing, sales, auctions, and technology transfer transactions that involve computers, software, networks, telecommunications equipment, and other intellectual property. Noerr’s IT partners are acknowledged throughout Europe as leading minds in outsourcing, IT outsourcing and other IT projects. The firm also provides a dedicated Outsourcing & IT Outsourcing Group, combing the firm’s hybrid expertise in business, communications, technology law, and IP, which allows them to provide exceptional business‐focused legal advice in relation to demanding transactions.

Recognized as “an authority in IT” by Chambers Europe 2012, Noerr has a reputation as “one of the few [German firms] to focus clearly on this field” (German JUVE guide 2011)

For more information, see www.noerr.com or our Outsourcing & IT Outsourcing Group http://www.noerr.com/en/Desktopdefault.aspx/tabid-332

NoerrAn elite IT team

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Orsingher Ortu – Avvocati Associati is a TMT specialized Italian law firm that counts 15 lawyers and fee‐earners. Our partners are consistently rated top tier on major directories in Information Technology and Outsourcing, Media and Intellectual Property and have spent a significant number of years as head of practice at international firms such as Freshfields or Dewey LeBoeuf

Our outsourcing team has more than 15 years of experience in advising multinational corporations on complex transactions including ITO/Infrastructure, BPO, HR deals

This team is skilled to assist your company for any aspects of an outsourcing transaction including corporate, employment and regulatory matters

Technical excellence, business‐orientation, responsiveness and reliability are key values underlying the relationship with our clients

The Firm “advises clients from a plethora of industries, but particularly those in the media sector. Domenico Colella [handles] complex technology deals” // Chambers, 2012

Orsingher Ortu – Avvocati AssociatiItalian top player in the TMT sector

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THANK YOU

Outsourcing Law Group

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Documents

ARD Times - Review of Employment Issues in Outsourcing in ...media.mofo.com/files/uploads/Images/130617-ARD-Times.pdf• Broad experience in IT and business process outsourcing •