Beyond the pandemic: rethinking the supply chain

Information and consultation requirements

Many jurisdictions have laws that oblige employers to inform and consult trade unions or employee representatives when planning major changes to their operations.

These requirements may extend beyond the local level if the manufacturer has a global framework agreement (GFA) with one of the global trade unions (eg IndustriAll or UNI Global). GFAs often address the company’s supply chain, with commitments that may impact any relocation exercise.

Similar requirements may apply if the company has an informal international employee representative body (eg a global employee forum) or, when operating within the EU/EEA zone, a European works council.

Even without an obligation to inform and consult with the workforce, businesses should consider very early in the process how to best communicate to employees and other stakeholders about any relocation project (and to anticipate possible negative reactions in the media and among politicians).

Transferring staff

The information and consultation procedures mentioned above may also need to cover the relocation of staff.

Depending on the individual contractual arrangements in place and whether any automatic transfer regime applies (eg the EU acquired rights directive), those being transferred may have to consent to the move.

Other employment laws

When considering where to relocate operations, employers should look at other labour-related requirements in potential host jurisdictions, such as minimum wages, working-time rules, employer social security contributions and union participation.

Proper due diligence will be needed, especially if the employer is considering relocating to a country with a reputation for human rights and labour violations (see the section on regulatory compliance).

Restrictions to downsizing

Employers needing to reduce headcount at certain production sites may be bound by business-support laws set up in response to the COVID-19 crisis. For example, Hong Kong, Malaysia, Italy, Spain and the Netherlands prohibit mass redundancies for a certain period of time after the employer has benefitted from the local wage subsidy scheme.

Employers will also need to look at any pre-pandemic government support measures they have benefited from, which may come with guarantees to maintain jobs at certain levels. Similar commitments may be found in existing sectorial or company collective bargaining agreements, or even in M&A agreements (eg those required under the UK Takeover Code).

Applicable rules for (mass) redundancies will also need to be complied with, which may require employers to notify authorities, and inform and consult the workforce.

Investment incentives

Manufacturers planning to set up production facilities in a new jurisdiction should find out if there are any incentives in place to attract new investments.

For example:

• when looking to transfer staff or hire new foreign employees, companies should see if the host country has a fast-track immigration process; and
• employers might want to know if there are any social security or tax reliefs or other financial incentives from which they could benefit.

Such schemes will need to be carefully analysed as the business may have to guarantee a minimum headcount for a period, which may limit its options in relation to further reorganisations.