HR In the Know 5/2024

EU legislation establishes and protects workers' rights, both individually and collectively.

In the case of cross-border operations (reorganisations) - transformation, division or merger of companies - EU employers must take into account the existing right of employee participation. Participation within the corporate bodies of companies should be understood as the right of employees or their representatives to (i) appoint, elect or recommend members of the supervisory board or board of directors (management board) or (ii) oppose the appointment of members of these company bodies.

New regulations on the right of employee participation

On 15 September 2023, an amendment to the Commercial Companies Code and a new Act on employee participation in a company established as a result of a cross-border transformation, merger or division of companies entered into force.

These provisions implement into the Polish local laws the Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions (the so-called Mobility Directive) and significantly expand the scope of the right of employees (as internal stakeholders of companies) to participate both in the cross-border reorganisation procedure itself, as well as in the bodies of companies established as a result of such reorganisation.

Employee participation in the cross-border reorganisation procedure

Pursuant to the new provisions of the Commercial Companies Code, the right of employees to participate in the cross-border reorganisation procedure is primarily of an informative and consultative nature. Employee representatives (and in their absence - the employees themselves) should be provided with, in particular: (i) a cross-border reorganisation plan (merger, division, transformation plan, respectively), the obligatory element of which is, among others, determining the conditions for exercising employee rights and the principles of employee involvement in determining their participation rights, as well as (ii) financial statements and management reports on the activities of the companies participating in the reorganisation for the last three financial years together with the auditor's report, and (iii) an expert opinion following examining of the reorganisation plan. Employees and their representatives have the right to submit comments on the reorganisation plan and opinions on the report prepared for them.

The right to participate in corporate bodies

The new regulations are intended to prevent employees from losing their right to participate or from this right being limited in a situation where the regulations of the destination country (the EU Member State in which the newly established company will be registered) do not provide for employee participation in corporate bodies of companies or the scope of such participation is narrower than in the departure (exit) country. 

As a rule, in the case of a cross-border reorganisation, the rules of employee participation in force in the destination Member State (the country of the registered office of the acquiring company or the new company resulting from the merger) apply to the converted company, the acquiring company or the company resulting from the cross-border merger, if such rules exist.

However, Directive 2019/2121 establishes a specific mechanism for the protection of employees' rights. It basically boils down to this: if in a company being converted, divided or participating in a merger (in the exit state) employees enjoy participation rights, in the company established as a result of a cross-border reorganisation, the participation of the employees should be guaranteed for the next 4 years from when the cross-border reorganisation became effective (i.e. subsequent cross-border or domestic reorganisations must not lead to a lower level of participation). Moreover, the need to maintain the above employee rights should also be taken into account when choosing the legal form of the newly established company - it cannot prevent employees from exercising their right to participate.

Compared to other European countries (e.g. Germany or Sweden), the Polish level of employee participation in corporate bodies is usually much lower, and therefore - employees of Polish companies established as a result of cross-border operations may potentially become beneficiaries of employee rights under the rules of other Member States.

Companies participating in cross-border operations will be obliged to guarantee the employees of the newly established Polish company the right to participate by:

1. an agreement on the rules of employee participation, which is concluded with a special negotiating body (SNB). The Polish act specifies in detail, among others: the procedure for appointing Polish members of the SNB.

or

2. adopting standard rules of participation specified in the directive and Chapter 3 of the Act - when the above-mentioned agreement with the SNB establishing different rules for employee participation was not concluded, or the authorities of the companies participating in the cross-border operation decide to be directly subject to these standard rules. Then, the decision on the form of employee participation and the division of seats in the bodies of the company established as a result of a cross-border operation for employee representatives rests with the employee representatives.

Polish members of the SNB, the employee representatives and employee representatives in the corporate bodies of the company established as a result of cross-border operations benefit from special protection of their employment relationship.

How can we help?

In connection with a planned cross-border reorganisation, the Linklaters Warsaw Employment team, in cooperation with other European Linklaters offices, will support you by:

• carrying out an analysis of the cross-border reorganisation from the perspective of employee participation rights, including the participation rules applicable to the newly established company;
• choosing a procedure to guarantee employees' right to participate (agreement with a special negotiation body or adoption of standard participation rules) and establishing an action plan;
• conducting proceedings to select Polish members of the special negotiating body or employee representatives;
• negotiating with a special negotiation body, including preparing an agreement on the principles of employee participation;
• assisting in other matters related to employees' exercise of their right to participate.