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2Confidential
Sodimedical case study
Voluntary liquidation launched end of 2009. Site closure : April 2010.
Court actions launched by employees (October 2011) in front of labor court: dismissals are null and void for lack of economic reasons. Company condemned to provide work to employees.
The French mother company filed for pre-insolvency after this judgment.
Court of Appeal called null and void the liquidation of the company, on the ground of the economic dependency of the company with other Group companies.
Court of Appeal called social plan null and void (Jan. 2012): (à compléter)
• Employees still occupying the site, not getting paid and are not laid off.
3Confidential
Who are we?
Oneida is specialized in helping companies contain the risks associated with their reorganizations :Social risksPolitical interferenceReputationLegal risks (1)
130/150 projects per year, pan European or local projects
Resizing, plant closures, post-merger integration, SSC…
In all industries and services
(1) with lawyers
Solvency
Insolvency
4Confidential
… France is clearly among the toughest countries:
Low Medium/High Higher/very High
• UK• Scandinavia• Austria
• Others • France• Belgium• Spain
Poor profitabilityof the activityPartial Closure
High profitabilityComplete Closure
Delocalization
5Confidential
Growing radicalism in France…
LAFARGELAFARGE
CONSTELLIUMCONSTELLIUM
GOODYEARGOODYEAR
UNILEVERUNILEVER
Plant closure cement factory
(74 jobs)
Hunger strike by 12 workers and the mayor of the town in front of Corporate HQs
Plant downsizing aluminum(120 jobs)
Boss-nappings with intensive media
coverage
Plant downsizingtyres
(1.000 jobs)
Legal guerilla action for last 3 years, violence,
delaying reorganization and putting divestment
at risk
Mustard factory closed in Dijon
(>100 jobs)
Strikes, products boycotts, political pressure, media
coverage
FRANCE
6Confidential
Growing radicalism…
• Strikes, violence, very low productivity,, boycotts
• Endless consultations
• Legal fights
• Involvement of politicians, labor administration
• Negative media coverage
• Prerogatives of unions/works councils
• Strikes, violence, very low productivity,, boycotts
• Endless consultations
• Legal fights
• Involvement of politicians, labor administration
• Negative media coverage
• Prerogatives of unions/works councils
What can happen
FRANCE
• Legal uncertainty
• Uncontrolled planning
• High restructuring costs
• Reputation
• Damage on the business
• Puzzled stock market
• Legal uncertainty
• Uncontrolled planning
• High restructuring costs
• Reputation
• Damage on the business
• Puzzled stock market
7Confidential
… is more a question of culture than of legal systems…FRANCE
Anglo-SaxonCountries
France, Latin Countries
• What is expected from the state
A legal framework allowing me to be
successful by myself
Protection, whatever happens
• Relationship with work
Transactional Emotional
• Dispute resolution Consensus Conflict• Communication Explicit, straight to
the pointImplicit,
Cartesian
8Confidential
In case of voluntary liquidation/downsizings
Acceptable reason for collective dismissals :
o Poor financial situation
o Technology change
o Need to safeguard the competitiveness
Economic justification : must be very comprehensive
Social plan : very complex
Approach of discussions :
o Refusal for the Business case
o “Forget the rules” for social measures (strikes : very common)
FRANCE
9Confidential
Involvement of many outsiders : financial advisor to the Works Council, politicians, courts,…
Very formal procedures
End-results required : opinion of Works Council
Duration of procedures : typically 3 to 6 months
Cost :
o Depends on CBA, age, seniority, quality of contingency plan…
o Anywhere between 40 K€ and 120 K€/head
o 4 major cost drivers (legal and additional severance, retraining leave, outplacement, job-creation tax)
In case of voluntary liquidation/downsizings (...)FRANCE
10Confidential
In case of insolvency
An alert procedure may be launched by both statutory auditors and Works council – Not easy if a few weeks before announcement
The purpose of French insolvency procedures is to preserve employment, not maximize to return for lenders and others creditors.
Works council will elect a rep to attend court hearing related to the opening of the procedure.
Strong pressure on the Administration to find buyer for the business(es) which can be continued or sold.
Employees are dismissed by the Administrator : they get unpaid salaries and legal severance from French Public Agency (AGS)
Potential actions by employees against mother company/shareholders :
o Co-employment, Tort actions, Commingling of assets, de facto directors
Possible actions by Administration against group too.
FRANCE
11Confidential
Try and reorganize without social plans
Be ready : target organization, social impact, planning…
Align management/reinforce/motivate
Communicate pro actively with most/all stakeholders
Take advantage of pre-insolvency procedures to communicate with Courts
Key success factors