Every business has personnel decisions to make, whether you need to phase someone out, cut a bit of weight or put new people in to manage an acquisition.  Over the course of the years one fact remains; if you need to reorganize your European activities the most prudent line of action is to plan for any change to take a few months and that it will likely cost you more than you had anticipated. The labor law aspects of an acquisition or day-to-day management of a European subsidiary give every US counsel nightmares.

In the United States, at-will employment makes these issues moot.  If the manager is not working out you simply move on. We have seen US companies, on countless occasions, terminate employment contracts due to employee incompetence or refusal to accept new responsibilities.  This often results in substantial litigation fees and damage awards.

If you cannot justify terminating the employee for “cause” the process becomes rather onerous. You should invariably get outside counsel involved in this process very early on but for the US company doing business in Europe there are generally a few simple steps to follow in order to avoid getting entangled in messy litigation that will detract your attention from doing business and potentially create a negative atmosphere within the company:

• Identify the person that may need to be phased out. Gather all job performance information that you have and systematically monitor her activities.
• Clearly define the job description of the targeted individual, or if the individual is to change roles, clearly define the expectations of her new role and make sure that it may not be deemed as a demotion from her previous position. As an employer you are expected to reassign personnel before considering other options.
• In the event that you will be transitioning the person into a different role, make it official by sending a letter and inviting her to have a meeting with management and HR.  Carefully explain why she is being asked to do another job and follow up with a written report of the meeting. This should include reasons to the effect that she may not be suited to her current position or she is not performing at expected levels.
• If she accepts her new role closely monitor her progress.  If she does not accept her new role, again reiterate that she is not performing as expected but do not simply fire her.  You are expected to reposition her within the company, which may be impossible.
• Begin the careful documentation of the process to try to reassign her to another comparable position in the company and, in the event that such is not possible, document the termination phase and ensure that every procedure is followed to the letter.
• Prepare a termination notice stating all of the reasons for termination and schedule a meeting with management and HR in order to hear her explanations regarding the reasons termination stated in the notice of potential termination.
• Once the employee has been notified of a potential termination proceeding it is normally prudent to limit the activities of the employee and her access to clients and company records.
• Terminate the employee via registered mail in the timeframe provided by law and pay all indemnities to the employee either at the end of the notice period or immediately if the period is waived.

Terminating an employee in Europe is a complicated process.  As general counsel you should plan for a minimum of three months and have local counsel walk you through the process step-by-step. Europe heavily favors employees and utilizes a “form over substance” approach to termination.

In the context of an acquisition, the reorganization process can be daunting.  The organization plan must be submitted to the employees (in the form of a worker’s committee) for approval. Local legislation may vary, but the approval of the committee is generally not required by law.  This process may, however, delay an acquisition by months.

The lessons we have learned from practicing in Europe and handling legal translations is simply this: never react too quickly to a labor situation as the long-term financial and internal consequences outweigh the immediate satisfaction of no longer having an unwanted employee. Take a step back from the situation, gather your resources, and make a plan to minimize the employee’s effects on the business and get local counsel involved to devise a strategy to phase the employee out.