Employee Rights in Mergers and Acquisitions, “Merger and acquisition agreements come with risks. Any company considering a merger or acquisition needs to focus on the legal, financial and technological details to get a solid deal. It is also important to do due diligence and consider culture.
Employee Rights in Mergers and Acquisitions
Mergers, acquisitions, joint ventures, capital investments or divestitures pose complex challenges in terms of their many risks and create opportunities to devise practical strategies to improve tax efficiency and certainty. As International Agreements cover companies operating around the world, the issues to be considered are very diverse.
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Transfer of Workers in Divisions
Divisional transactions are qualitatively different from acquisitions and mergers. As noted earlier, in spin-off transactions, certain assets, contracts and workers are automatically transferred to the acquiring company. Accordingly, all rights, benefits or receivables of the transferred workers against the transferor company in the spin-off transactions also pass to the transferring company. For this reason, it is important for the transferor company to choose its workers to be transferred.
Mergers and Acquisitions
Deal making – in the form of mergers and acquisitions – has been an important part of the business finance world for many years. According to the nonprofit think tank Institute of Mergers, Acquisitions and Alliances, companies have announced more than 325,000 mergers and acquisitions valued at more than $34.9 trillion over the past 40 years. According to BCG’s 2019 M&A report, global M&A value increased by 7 percent compared to 2018, close to the five-year average.
Then, the pandemic that swept the world in 2020 upended almost every aspect of our lives, including financial deals. During a year of shutdowns and quarantines, it’s no surprise that M&A activity has dropped significantly in 2020. But most deal makers surveyed in the US expect M&A activity to return to pre-pandemic levels by 2021, according to AG’s Future Trends in Mergers & Acquisitions Survey.
Transfer of Workers Pursuant to Labor Law No. 4857
Due to the unique restructuring characteristics of the division operations and to protect the workers in these operations, there are provisions regarding the transfer of workers’ rights in both the Labor Law and the TCC.
6(1) of the Labor Code. “In the event that a workplace or a part of a workplace is transferred to another person based on a legal transaction, the employment contracts existing at the workplace or part of it on the date of transfer, together with all its rights, pass to the transferee. rights and obligations.” As can be seen, in accordance with this article, the transferee company is also obliged to take over the rights and obligations of the transferred employee in all transactions involving the transfer of employees. In such a case, all rights of the employee continue according to the date he started working in the transferring company.
This special protective provision in the Labor Law is natural, since a worker who has worked in a company for 15 years should not be qualified as a newly hired worker in the acquiring company. In such a case, the employee may lose his rights in the company such as severance, severance pay, vacation. This protection is so important that, pursuant to Article 6(3), if the transferee company fails to fulfill its obligations to the transferred workers, the transferor company is also responsible for the employee’s salary, bonuses, holidays and related payments. Before the transfer with the acquiring company for a period of 2 years.
On the other hand, pursuant to Article 6(4), “the provisions of joint liability shall not apply in the event that the legal entity is dissolved by merger or participation or a change of type.” The relevant article counts the cases in which the liability provisions will not be applied together for a period of 2 years. In this context, although it is a type of transaction not listed in the article, it can be said that the liability provision will not be applied in case of full divisions for 2 years, since the transferor does not have any assets that can share the responsibility. with the transmitting. On the other hand, considering the protection purpose of the provision, m. It is not counted as one of the transaction types to which the relevant rule in 6 will not be applied. and the transferee will be jointly liable without time limitation.
Transfer of Workers Pursuant to the TCC
In addition to the Labor Law, as stated above, the special provisions of the TCC for October regulate the transfer of workers in division processes. Therefore, this situation may create uncertainty about which provisions will be applied in practice. However, in case of conflict of provisions, it can be said that the provisions of the TCC should be applied. As follows, while the provisions of the Labor Law regulate the transfer of workers in all kinds of transactions, the provisions of the TCC are especially specific to division transactions and aim to protect the workers who will be affected by this process in division. operations.
In this context, pursuant to Article 178(1), in full or partial division, “Service contracts made with employees pass to the transferee together with all rights and obligations arising from this contract until the transfer day, unless the worker objects. ” As can be seen, there is a special provision in the TCC that allows workers to object to the transfer of employment contracts. In such a case, the employee’s employment contract expires at the end of the notice period.
In addition, TCC, in accordance with October 178(3), regulates that the former employer and the transferee are jointly and severally liable for the receivables due and the receivables due before the division of the employee. the date on which the service contract would normally expire or expire due to the employee’s objection. As can be seen, unlike the Labor Law, the TCC does not limit the joint liability rule to 2 years. This situation can be interpreted as providing the worker with October protection. However, it can be said that this provision cannot be applied to full divisions for the reasons stated above.
Rights and Obligations to be Assigned
Although both the Labor Law and the TCC refer to the rights and obligations of workers, they have not defined these rights and obligations. It will be possible to say that wages, bonuses, overtime, vacation and related payments are the rights of the workers to be transferred. In addition, it can be said that the payments arising from the termination of the employee’s contract, such as notice and severance pay, are also transferable rights in October. However, there is no clear provision as to whether the employee will be entitled to severance pay if the transferee objects according to Article 178(1). However, considering the purpose of the provision, which is the protection of the worker, and the TCC specifically recognizing the right to object, it can be said that the worker should not suffer any loss of rights if he objects.