Employment issues in M&A transactions in Ukraine

1. Check whether:

• any individual employment agreements (contracts), an effective collective bargaining agreement or internal regulations exist at the target company granting individual employees additional entitlements as a result of the transaction (e.g. employment guarantees, golden parachutes, etc.); 
• any employees’ representative bodies (trade unions) exist at the target company, and whether any provisions of the collective bargaining agreement or internal regulations at the target company exist governing the information and/or consultation of employees’ representative bodies in relation to the transaction. 

2. Prepare the following in draft form:

• Not applicable, unless stated otherwise in a collective bargaining agreement or internal regulations in force at the target company. 

3. Inform / Notify

• Not applicable, unless stated otherwise in a collective bargaining agreement or internal regulations in force at the target company.

4. Consult

• Not applicable, unless stated otherwise in a collective bargaining agreement or internal regulations in force at the target company. 

5. Implement

• Not applicable, unless stated otherwise in a collective bargaining agreement or internal regulations in force at the target company. 

1. Check whether:

• any individual employment agreements (contracts), collective bargaining agreements or internal regulations exist governing the granting of additional entitlements to individual employees either as a result of or in connection with the transaction (e.g. information or consultation entitlements) which must be observed by the target; 
• any provisions of a collective bargaining agreement or internal regulations exist at the target company granting employees’ representative bodies (trade unions, if such bodies exist) additional information or consultation entitlements relating to the transaction which must be observed by the target.

2. Prepare the following in draft form:

• Not applicable, unless stated otherwise in a collective bargaining agreement or internal regulations in force at the target company. 

3. Inform / Notify

• Not applicable, unless stated otherwise in a collective bargaining agreement or internal regulations in force at the target company. 

4. Consult

• Not applicable, unless stated otherwise in a collective bargaining agreement or internal regulations in force at the target company. 

5. Implement

• Not applicable, unless stated otherwise in a collective bargaining agreement or internal regulations in force at the target company. 

N.B.: Ukrainian law does not provide for an automatic transfer of employees in cases where assets are transferred (even when such assets comprise a separate business). 

1. Check whether:

• Not applicable, unless the seller intends to transfer/make redundant/change the material terms of employment of its employees in connection with the sale of the assets. In the latter case, general requirements set by law for each procedure apply (see below). 
• If the redundancy option is being considered, check whether any of the potentially affected employees: (I) qualify as so-called ‘protected employees’ (i.e. those that cannot be made redundant); and (II) are members of a company-level trade union operating within the seller’s organisation (if applicable). 

2. Prepare the following in draft form:

• Not applicable, unless the seller intends to transfer/make redundant/change the material terms of employment of its employees in connection with the sale of the assets. In the latter case, general requirements set by law for each procedure apply (see below). 
• If the redundancy option is being considered, check whether any of the potentially affected employees: (I) qualify as so-called ‘protected employees’ (i.e. those that cannot be made redundant); and (II) are members of a company-level trade union operating within the seller’s organisation (if applicable). the following in draft form: 
• Not applicable, unless the seller intends to transfer/ make redundant/change the material terms of employment of its employees in connection with the sale of the assets. In case of a transfer: 
• an order to dismiss the relevant employees in connection with their transfer to the purchaser (if they have consented to such a transfer). 
  In case of redundancy: 
• a decision on the forthcoming redundancy, specifying the reasons for it, the number and categories of the affected employees and a timeframe for its implementation; 
• notifications to the employees and company trade union operating at the seller (if applicable), as described in section 3 below; 
• an order to terminate employment in connection with 
  If a change to the material terms of employment is to be implemented (e.g. a change of salary, bonuses/other benefits, working hours, etc.): 
• an order to change the material conditions of employment specifying any relevant changes; 
• notification for the attention of any employees whose working conditions are to be changed (see section 3 below for more details); 
• a statement acknowledging the employee’s consent to remain employed under the amended conditions (one such statement for each employee affected). 
• the redundancy (to be executed either on the last day of the employment of the affected employees, or in advance).  

3. Inform / Notify

• Not applicable, unless the seller intends to transfer/make redundant/change the material terms of employment of its employees in connection with the sale of the assets. 
• In the event of a transfer: 
  • each employee affected by the transfer must be approached and given the option to transfer their employment to the purchaser. The purchaser and seller can make this offer jointly. The transfer will only be possible if the relevant employee consents to it. The law does not lay down a procedure for approaching/notifying employees regarding a transfer to another entity. Notice of the transfer must be provided prior to the intended transfer date; 
  • a specific transfer procedure must be agreed with the purchaser and the employees affected by the transfer (for further details of possible transfer options, see section B. II below). 
• In the event of redundancy: 
  • inform the company-level trade union (if such a body exists at the seller company) of the redundancy under consideration. Notice must be provided within three months after the date on which the decision on the redundancy is adopted, but no later than three months before the date being considered for the redundancy to take place. Considering the aforementioned time restraints, it is advisable to notify the trade union promptly after a decision has been taken by the seller regarding the redundancy; 
  • give two months’ advance notice to employees affected by the redundancy; 
  • if the redundancy qualifies as a ‘mass lay-off’ 1 Under the Law of Ukraine on Employment, which came into effect as of 1 January 2013, a ‘mass lay-off’ is defined as a one-time dismissal or series of dismissals at the employer’s discretion made within one month, if: - 10 or more employees of a company employing 20 to 100 individuals are being dismissed; or - 10% or more of the workforce of a company employing 101 to 300 employees are being dismissed; or - 30 or more employees are being dismissed from a company employing 301 to 1,000 individuals; or - 3% or more of the workforce are being dismissed from a company employing more than 1,000 individuals. , give two months’ advance notice of the plans to the State Employment CentreService (the ‘Agency’). 
• If a change is to be made to the material terms of employment: 
  • notify a company-level trade union operating at the seller (if applicable) of the contemplated changes, but only if such changes (I) produce a deterioration in working conditions; and (II) are caused by the liquidation, reorganisation, change of ownership or partial stoppage of production of/by the seller. The law does not lay down a specific timeframe for such notice to be provided. However, in light of the duty of notification in cases of redundancy, it should be provided at least three months prior to the implementation of the changes being considered; 
  • notify each employee whose terms of employment are to be changed prior to the date on which the change is to be implemented. Two-month prior notice will be required once martial law expires or is cancelled in Ukraine. 

4. Consult

• Not applicable, unless the seller intends to transfer/make redundant/change the material terms of employment of its employees in connection with the sale of the assets. 
• In the event of redundancy: 
  • consult with the company-level trade union (if such a body exists at the seller). According to law, the employing company must consider any suggestions submitted by the trade union regarding the redundancy process. Consultation must take place within three months after a decision on the redundancy is taken, but no later than three months before its implementation; 
  • request consent from the company-level trade union (if such a body exists) to dismiss persons elected to trade union bodies. This consent, if granted, is valid for one month as of the date of its receipt by the employer. As the trade union has 18 days to consider the employer’s request, the seller is recommended to submit such a request one month prior to the redundancy date under consideration. This requirement will apply to all members of the trade union once martial law expires or is cancelled in Ukraine. 
• If a change to the material terms of employment is to be implemented: 
  • consult a company-level trade union (if such a body exists) regarding the contemplated changes, but only if such changes: (I) produce a deterioration in working conditions; and (II) are caused by the liquidation, reorganisation, change of ownership or partial stoppage of production of/by the seller. The law does not lay down a specific timeframe for such notice to be provided. However, in light of the duty of notification in cases of redundancy, it should be provided at least three months prior to implementation of the changes being considered. 

5. Implement

• Not applicable

1. Check whether:

• Not applicable, unless the purchaser intends to employ some of the seller’s employees in connection with acquisition of the assets,  i.e. an employee transfer is being considered by the parties. 
• If an employee transfer is being considered: 
  • check the material terms under which the employees subject to transfer are to be employed by the seller. For this purpose, it is advisable to check their individual employment agreements (contracts) and collective bargaining agreements with the seller, the internal regulations and policies of the seller providing additional benefits and/or guarantees for the employees in question. Although the applicable law does not require the seller (as the transferee) to offer the same or better conditions of employment to the employees being transferred, from a practical standpoint, the employees will not consent to their transfer unless this is the case.  

2. Prepare the following in draft form:

• Not applicable, unless the purchaser intends to employ some of the seller’s employees in connection with the acquisition of the assets. In the latter case, there are two options under Ukrainian law for an employee transfer from the purchaser (transferor) to the seller (transferee): 
  • dismissal of the employees by the transferor, with their simultaneous employment by the transferee (‘Option 1’); or 
  • transfer of the employees from the transferor to the transferee pursuant to a specific transfer procedure (‘Option 2’). 
• If an employee transfer is being considered: 
  • an employment agreement must be entered into between the employees affected by the transfer and the purchaser (this document is not mandatory under Ukrainian law); 
  • if the transfer is implemented pursuant to Option 2, a written request must be issued to the seller regarding the purchaser’s intention to offer an employment agreement to the employees affected by the transfer and requesting the seller to terminate the employment relationships with these employees by a specific date. 

3. Inform / Notify

• Not applicable, unless the purchaser intends to employ some of the seller’s employees in connection with acquisition of the assets. 

• If an employee transfer is being considered:
  • each employee affected by the transfer must be approached and offered the option of transferring their employment to the purchaser. The purchaser and seller can make this offer jointly. The transfer will only be possible if the employee in question consents to it. The law does not lay down a procedure for approaching/notifying employees regarding the transfer to another entity. Notice on the transfer must be provided at least two months prior to the intended transfer date. 
• Not applicable, unless the purchaser intends to employ some of the seller’s employees in connection with its acquisition of the assets. 

4. Consult

• If an employee transfer is being considered: 
  • a specific transfer procedure must be agreed with the purchaser, seller and affected employees (i.e. whether the transfer is to be made using Option 1 or Option 2). 

5. Implement

• Not applicable

In the event of a merger, the surviving company automatically becomes the employer of any employees previously employed by the merged entity. Individual employment contracts and collective bargaining agreements applicable to the employees of the merged entity remain unaffected following the merger. The surviving company becomes the full legal successor of the merged company. Among other things, this means the surviving company takes on all the labour-related obligations of the merged company. 

1. The surviving company must check:

• the material conditions of employment (salary, benefits, bonuses, etc.) of the staff employed by the entity which ceases to exist following the merger. Such conditions may be determined by factors including the individual employment agreements (contracts) entered into between the affected employees and the company to be merged, the latter’s collective bargaining agreement (if one has been concluded), internal regulations and policies, as well as orders. 

2. Prepare the following in draft form:

• notification for the attention of the employees of the company being merged of their transfer to the surviving company in connection with the merger. 
• a statement to be signed by each employee affected by the transfer providing their consent to be transferred to the surviving entity as a result of the merger, and to remain employed under amended conditions (transfer).

3. Inform / Notify

• the employees affected by the transfer of the following: 
  • the planned merger; 
  • the transfer of their employment to the surviving company in connection with the merger. 
  • Notification can either be made alone by the company being merged or jointly by the merged and the surviving company. 

4. Consult

• Both parties must seek the consent of employees regarding their transfer to the surviving company in connection with the merger. 

5. Implement

• Not applicable