QuickCounsel

Employment Considerations When United States Companies Manage or Acquire Employees in Europe Or Canada

Overview Hiring/Firing Staff Workforce Restructuring Business Closure/Mass Layoff Business Sale/Transfer/Outsourcing Privacy/Data Protection Additional Resources Rate this QuickCounsel

Overview

When considering personnel issues arising from transactions involving the sale, acquisition, or management of corporate affiliates in Canada or Europe, application of principles taken for granted in the United States will often result in significant liability in Canada and Europe. Canada is similar to the United States in that employment issues are governed by a complex web of federal and provincial laws. In Europe, which operates as a free trade zone, there is wide variation of employment laws between the member states, although approximately 20 “Directives” provide for minimum standards. The most common mistakes US employers make in Canada and Europe are in the hiring/firing of staff, workforce restructuring (downsizing), business closures, sale or transfer of a business, and employee privacy (data protection).

In addition to obtaining competent, local labor and employment advice in the Canadian province or European country involved, do not assume that processes, timescales, and costs typical in the United States will be achievable: allow for more time and expense. If buying or selling a business (or serving as an outsource vendor), be aware of the cost impact of the workforce transfer (in Europe) or the new bargaining obligation and apply enhanced due diligence.

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Hiring/Firing Staff

There is no concept of “at will” employment in Canada or Europe. Employment is primarily structured through formal, written contracts (often mandatory in Europe) that set forth provisions regarding pay and working conditions. Also, because employment is not at will, absent “just cause” (either spelled out in the contract or defined through labour court decisions), Canada and Europe have minimum standards for notice prior to termination. In Canada, a properly drafted contract might limit the period of notice required, although certain provincially imposed minimums must be observed. In some European countries, termination without a legally valid reason may be void or could result in large damage awards for unfair discharge.

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Workforce Restructuring

When making changes to pay or working conditions, Canada and Europe impose limitations not common in the US. For example, in Canada a significant change in an employee’s compensation may amount to a constructive discharge, triggering an employee’s right to notice. In Europe employers must give information to, and consult with, labor unions and works councils, and in some countries must first obtain their permission before making any changes. Furthermore, because employment is pursuant to contract, unilateral changes are not permitted, so an employer must obtain the employees’ agreement (particularly if there is no labor union or works council) to changes in pay or working conditions.

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Business Closure/Mass Layoff

In both Canada and Europe, there is normally a minimum period of prior notice and, in some Canadian provinces and European countries, a minimum severance that must be provided prior to business closure or mass layoff. In some European countries, it is necessary to consult with a labor union or works council as soon as closure/layoff is under active consideration by the employer. Furthermore, some countries will not allow a closure/layoff until the labor union or works council agrees to it.

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Business Sale/Transfer/Outsourcing

In Canada, when an employer is unionized, the union’s bargaining rights will transfer to the purchaser, and the successor may also be liable for financial obligations to employees.

In Europe, not only is prior consultation with labor unions or works councils mandatory, but the workforce cannot be dismissed by reason of the sale or transfer. Instead, the workforce is transferred to the new owner, along with their contracts and accrued rights. These same requirements apply to most outsourcing deals.

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Privacy/Data Protection

The Canadian approach to data protection and privacy is more like the U.S. approach than the European approach. In Canada, federal protections apply to federally regulated employees, while only certain provinces (currently Alberta, British Columbia, and Quebec) regulate privacy and data protection for provincially regulated employees. Often, privacy is addressed through human rights legislation (e.g., drug testing is permissible in only limited circumstances).

In Europe, many European countries severely limit an employer’s ability to conduct workplace monitoring or testing (e.g., drug testing, monitoring of emails, etc., are severely limited), with the transfer of employees outside of the European Union subject to stringent restrictions. In addition, employees normally have the right to check data.

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Additional Resources

Government Forms and Information

Sponsor Resources

ACC Resources

For further information, contact this QuickCounsel author Douglas H. Duerr at Elarbee, Thompson, Sapp & Wilson LLP, the Atlanta, Georgia member of Worklaw® Network.

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