Personnel-Related Legal Aspects of Site Consolidation

No legal advice can be given at this point. It is merely intended to point out aspects that must be taken into account in the event of a site consolidation.

Aspects of collective and individual law must be taken into account when merging sites. The collective law aspects include the fact that a site merger is a significant operational change which requires a social plan and a reconciliation of interests.

In the reconciliation of interests, the disadvantages for the employees must be defined and a settlement negotiated between the operating parties with the involvement of the relevant trade union and the employers’ association. For the relocated workplaces, the compensation can consist of relocation assistance or travel allowances or the establishment of a company transport service.

Aspects of individual law are reflected in the fact that the relocation of jobs in the context of a transfer of business results in a change of employer for the employees concerned. If the wage levels at the sites were to differ, the wage costs of the overall unit would increase compared to the status quo. Employees from a previously “less expensive” location who were transferred to a location where higher wages were paid would in future be paid in accordance with the applicable company agreements at the new location, i.e. they would become more expensive. If employees are relocated from a previously “more expensive” site to a “cheaper” site, they would take their “vested rights” with them. Even by means of a change notice, nothing can be taken away from the employees, provided the company is not distressed because it is “not operationally justified”. This can lead to a “two-class society” in the future, which can lead to distortions. The initial differences can only be reduced by fluctuation and by “organic development”, and an equalization would possibly take decades, depending on the age of the workforce.

It may make sense to form a new company in advance of a site consolidation. The new company can manage two plants with two works councils that form a joint works council. A site consolidation would then have to be agreed with the central works council. In the interim period until the relocation, a long-term strategy can be negotiated with the central works council, including the conditions under which new hires can already be made.

For legal advice on the topic of site consolidation, the involvement of relevant legal expertise is recommended.


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