Employment issues in M&A transactions in Luxembourg

1. Check whether:

• the structure of the transaction is a true share sale (and that it is not combined with an asset sale) to ensure that the requirements for a transfer of undertakings (“Transfert d’entreprise”) pursuant the Council Directive 2001 / 23 / CE and articles L. 127-1 to L. 127-6 of the Luxembourg Labour Code are not triggered; 
• generally, the requirements for a transfer of undertakings are not triggered in the event of a share deal, as the change of an enterprise’s ownership structure neither constitutes a change of the employer’s identity, nor a transfer of undertakings; 
• the terms of any relevant collective bargaining agreement include any information and consultation obligations in relation to the share deal; 
• any contract in the share deal includes a change of control provision. 

See Section B. for important rules relating to asset deals. 

2. Prepare the following in draft form:

N/A

3. Inform / Notify

• Luxembourg labour law does not contain significant requirements relating to such share deal constellations; 
• Nevertheless, the business manager has the obligation to regularly communicate information concerning the recent and potential evolutions of the company and its economic situation (article L.414-4. of the Luxembourg Labour Code) depending on the structure of the staff representation as follows: 

1. at least three times per year during meetings with the staff delegations; 
2. monthly if a Company Joint Committee* exists in the company. 

Please note that neither discussions nor negotiations are foreseen by law concerning this information process.

4. Consult

N/A

5. Implement

N/A

1. Check whether:

• the structure of the transaction is a true share sale (and that it is not combined with an asset sale) to ensure that the requirements for a transfer of undertakings (“Transfert d’entreprise”) pursuant to Council Directive 2001/23/CE and articles L. 127-1 to L. 127-6 of the Luxembourg Labour Code are not triggered;
• generally, the requirements for a transfer of undertakings are not triggered in the event of a share deal, as the change of an enterprise’s ownership structure neither constitutes a change of the employer’s identity, nor a transfer of undertakings;
• the terms of any relevant collective bargaining agreement include any information and consultation obligations in relation to the share deal;
• any contract in the share deal includes a change of control provision.

See Section B. for important rules relating to asset deals.

2. Prepare the following in draft form:

N/A

3. Inform / Notify

• Luxembourg employment law does not contain significant requirements relating to such share deal transactions.
• Nevertheless, the business manager has the obligation to regularly communicate information concerning the recent and potential evolutions of the company and its economic situation (article L.414-4. of the Luxembourg Labour Code) depending on the structure of the staff representation as follows:
  1. at least three times per year during meetings with the staff delegations;
  2. monthly if a Company Joint Committee* exists in the company.

Please note that neither discussions nor negotiations are foreseen by law concerning this information process.

4. Consult

N/A

5. Implement

N/A

1. Check whether:

• the transfer of undertakings (“Transfert d’entreprise”) pursuant the Council Directive 2001 / 23 / CE and articles L.127-1. to L.127-6. of the Luxembourg Labour Code applies to the transaction. 
• Usually it applies to asset deals and imposes additional obligations on employers, and gives extra protection to employees; 
• a relevant staff representative body exists; 
• a collective bargaining agreement exists which may stipulate special requirements; 
• an information and consultation process has been implemented with the relevant staff delegation. This must take place before an actual decision is made and before an agreement is signed; 
• any contract in the asset deal includes a change of control provision.

2. Prepare the following in draft form:

• a written consultation memo for the attention of the Company Joint Committee* or to the relevant staff delegation in order to ensure compliance with the information and consultation process
  (Article L. 414-4 (4). of the Labour Code).
• We recommend preparing the wording of individual letters to be sent to the employees confirming the change of employer (not mandatory).
  If the asset deal qualifies as a transfer of undertakings, the following additional requirements apply:
• An information memo has to be drafted containing:
  1. the fixed or potential date for the transfer;
  2. the reason for the transfer;
  3. the legal, economic and social consequences of the transfer for the employees;
  4. the planned measures in relation to the employees.

• A notification letter has to be sent to the purchaser concerning the rights and obligations that are transferred through the asset deal. A copy of this letter should be sent to the Labour Inspection in Luxembourg (“Inspection du Travail et des Mines“); 
• If measures are planned concerning the employees, a consultation memo on planned measures has to be addressed to the relevant staff representative body. 

3. Inform / Notify

• In due time and before the asset deal, the business manager should provide information concerning the possible important changes that the asset deal could induce, to: 

• If measures concerning the employees are being considered, the seller shall consult the staff representative body of his employees in due time on such measures in order to reach an agreement
  In case of a transfer of undertakings: 
• The seller should notify, in a timely manner, the purchaser of all the rights and obligations transferred, taking into account that these rights and obligations are or should be known by the purchaser at the time of the asset deal. 
• Inform the employees concerning the change of employer (not mandatory but recommended). 
• the relevant staff representative bodies; 
• and in case there is no staff representative body, the concerned employees directly (only in case of transfer of undertakings). 

4. Consult

• The relevant staff representative body should be consulted by the employer in case of important changes for the structures of the company following an asset deal, in order to reach an agreement. 
• If measures concerning the employees are planned with the transfer of undertakings, the purchaser shall consult in due time and before the transfer the relevant staff representative or employees directly, in order to reach a deal. 
• However, please note that the employer is not bound by the opinion or advice given by the relevant staff representative body.

5. Implement

• The asset deal should be implemented following proper information/ notification and, if applicable, following a consultation process of the relevant representative body relative to the transferred employees. 
• A coordinated timetable between the seller and the purchaser should be established.

1. Check whether:

• the transfer of undertakings (“Transfert d’entreprise”) pursuant the Council Directive 2001 / 23 / CE and articles L.127-1. to L.127-6. of the Luxembourg Labour Code applies to the transaction. 
  Usually it applies to asset deals and imposes additional obligations on employers, and gives extra protection to employees; 
• any contract in the asset deal includes a change of control provision. 
• an information and consultation process has been implemented with the relevant staff delegation. This must take place before an actual decision is made and before an agreement is signed; 
• a collective bargaining agreement exists which may stipulate special requirements; 
• a relevant staff representative body exists; 

2. Prepare the following in draft form:

• Prepare a written consultation memo for the attention of the Company Joint Committee* or to the relevant staff delegation in order to ensure compliance with the information and consultation process (Article L. 414-4 (4). of the Labour Code). 
• We recommend preparing the wording of individual letters to be sent to the employees confirming the change of employer (not mandatory). 

• If the asset deal qualifies as a transfer of undertakings, the following additional requirements apply: 

1. An information memo has to be drafted containing:
2. the fixed or potential date for the transfer;
3. the reason for the transfer;
4. the legal, economic and social consequences of the transfer for the employees;
5. the planned measures in relation to the employees.

• If measures are planned concerning the employees, a consultation memo on planned measures has to be addressed to the relevant staff representative body.

3. Inform / Notify

• In due time and before the asset deal, the business manager should provide information concerning the possible important changes that the asset deal could induce, to:
• Inform the employees concerning the change of employer (not mandatory but recommended). 

In case of a transfer of undertakings:

• If measures concerning the employees are being considered, the seller shall consult the staff representative body of his employees in due time on such measures in order to reach an agreement.

4. Consult

• The relevant staff representative body should be consulted by the employer in case of important changes for the structures of the company following an asset deal, in order to reach an agreement.
• If measures concerning the employees are planned with the transfer of undertakings, the purchaser shall consult in due time and before the transfer the relevant staff representative or employees directly, in order to reach a deal.
• However, please note that the employer is not bound by the opinion or advice given by the relevant staff representative body.

5. Implement

• The asset deal should be implemented following proper information/notification and, if applicable, following a consultation process of the relevant representative body relative to the transferred employees.
• A coordinated timetable between the seller and the purchaser should be established.

Please note that the purchaser remains liable for any obligations of the seller which existed before the transaction.

In Luxembourg a merger transaction equals a transfer of undertakings. Therefore, please refer to Section B. Asset Deal and more specifically to the paragraphs concerning the transfer of undertakings.