Why consultations are critical during acquisitions

Most HR professionals will be well aware of their obligation to consult when considering mass redundancies but it’s not uncommon for leaders to overlook the issue when it comes to acquisitions, claims one industry lawyer.

Peter Chemis is a partner with Buddle Findlay – he says employers who are selling their organisation have the same legal duty to consult as they would during major restructuring – even employees will be left largely unaffected.

“Consultation is a legal requirement,” stresses Chemis. “Even if nobody is going to lose their job, they are still effectively going to be made redundant so you have to meet your obligation to consult.”

Chemis says a situation could easily arise when employees finish with their original employer on Friday then return to work for the new employer, at the same location, doing the job, on Monday – as a result, HR professionals might not feel it’s necessary to consult.

The very nature of acquisitions also makes consultations a little trickier as both organisations involved often want to retain an element of privacy until the deal is complete.

“The commercial secrecy that shrouds some of these things doesn’t lend itself to standard consultations so employers or vendors ignore it,” says Chemis. “It does raise some curly questions with the obligation to consult and HR professionals need to get their head around that.”

According to Chemis, consultations are undoubtedly more difficult during acquisition processes – even if employees aren’t going to lose their job – because employers can’t always share every detail. However, they can still meet their legal obligations with careful planning.

“They just have to see it in its right context and ask those core questions,” says Chemis. “Often you’ll see a situation where they say; ‘We’re in negotiations with another company, it was secret for a while but now it’s not, if it were to go ahead it would mean that your position was redundant but we’re currently talking to the prospective purchaser about employees being offered roles with them.”

Chemis says all employment agreements include a standard contractual provision which makes it a lawful requirement for organisations that are selling their business to at least discuss employees with the purchaser.

“As the vendor employer you have to go and at least discuss it with the purchaser and ask if they can employ your people or will there be opportunities for them to get jobs,” he explains.

“You’d be sharing all of that with your employees as part of the consultation good faith process – at that level it’s as much about keeping people abreast of what’s happening and keeping everybody comfortable and that’s your good faith obligation,” says Chemis.

“If you just ignore your employees you’re going to get people coming back to you saying you treated them appallingly and they never knew what was going on,” he warns.