Employment issues in M&A transactions in Sweden

Check  

• whether the purchaser is bound by any collective bargaining agreement. 
• whether there is a duty to consult/negotiate with the trade union(s) with which the purchaser is bound by collective bargaining agreement. Whether the purchaser has a duty to consult/negotiate must be determined on a case-by-case basis. 
• whether any risks are identified during the due diligence process carried out on the target company, such as invalid/unreasonable or unusual terms in individual employment agreements or collective bargaining agreements (regarding notice period, bonus, commission, non-competition clauses and/or non-solicitation clauses, etc.), and whether there are any former employees with right to re-employment or any other claims or potential claims towards the target related to employees or the work environment. 
• whether the purchaser has a European Work Council (EWC). If so, check whether the purchaser has an obligation to provide information to and/or consult with the EWC.

Prepare 

• and adapt the Share Purchase Agreement in order to address the risks identified in the due diligence process. 
• information to the trade union(s). The collective bargaining agreement(s) may provide for a procedure of consultations/negotiations, which must be followed. 
• information to the EWC. 
• Information to the employees. 

Inform/Notify  

• the trade union(s) and call for consultations/negotiations in due time. 
• the EWC. The information shall be provided at a time, in a manner and with content, which enables employee representatives to make a careful assessment of the possible consequences. 

Consult 

• with the trade union(s). The consultation/negotiation with the trade union(s) must be conducted and concluded before any decision on the matter is made. Although the Swedish term would be translated to negotiation rather than consultation, the trade union(s) do not have veto rights to the decision.  
• with the EWC. Consultation takes place through the establishment of a dialogue and exchange of views between the purchaser and the EWC at a time, in a manner and with a content that allows the EWC, on the basis of the information received, to comment on the proposed measures within a reasonable time so that they can be considered in the decision-making process by the purchaser. 5. Implement   

Implement 

• after conclusion of consultations/negotiations. For the consultations/negotiations to be considered concluded, normally the minutes must be signed by both parties. 

Check  

• whether the target is bound by any collective bargaining agreement. 
• whether there is a duty to consult/negotiate with the trade union(s) with which the target is bound to by collective bargaining agreement. Whether the target has a duty to consult/negotiate must be assessed on a case-by-case basis. Normally, the target of a share deal does not have a duty to consult/negotiate with the trade union(s), but the target may be under a duty to consult/negotiate if the share deal entails major changes to the target’s business or for its employees (e.g. redundancies following the transfer).  

• Whether the target has a European Work Council (EWC). If so, check whether the target has an obligation to provide information to and consult with the EWC. 

Prepare  

• information to the trade union(s). The collective bargaining agreement(s) may provide for a procedure of negotiations, which must be followed. 
• information to the EWC. 

Inform/Notify  

• the trade union(s) and call for consultations/negotiations in due time.  
• the EWC. The information shall be provided at a time, in a manner and with content, which enables employee representatives to make a careful assessment of the possible consequences. 

Consult 

• with the trade union(s). The consultations/negotiations with the trade union(s) must be conducted and concluded before any decision on the matter is made. Although the Swedish term would be translated to negotiation rather than consultation, the trade union(s) do not have veto rights to the decision.  
• with the EWC. Consultation takes place through the establishment of a dialogue and exchange of views between the target and the EWC at a time, in a manner and with content that allows the EWC, on the basis of the information received, to comment on the proposed measures within a reasonable time so that they can be considered in the decision-making process by the target.

Implement 

• after conclusion of consultations/negotiations. For the consultations/negotiations to be considered concluded, normally the minutes must be signed by both parties. 

Check 

• whether the asset deal entails a transfer of undertaking, business or part thereof in relation to the EU Directive on Transfer of Businesses and the implementations of that directive into Swedish law. 

• whether the seller is bound by any collective bargaining agreement. If not, check which trade unions have members affected by the asset deal. The seller must consult/negotiate with the trade unions with which the seller is bound by a collective bargaining agreement. If the seller is not bound by a collective bargaining agreement, the seller must consult/negotiate with all trade unions that have members affected by the asset deal.  
• whether actions must be taken prior to the transaction, such as termination of collective bargaining agreements, if possible. There are specific rules regarding applicable collective bargaining agreement when they differ between the parties. 
• whether in the event of a transfer of the assets of a company or a part thereof, employees are involved in the targeted part of the company on a structural basis; 
• whether working conditions derived from individual and/or collective bargaining agreements (including pension schemes) are applicable to the employees affected by the transfer. 
• whether the seller has a European Work Council (EWC). If so, check whether the purchaser has an obligation to provide information to and consult with the EWC due to the asset deal. 

Prepare  

• information to the trade union(s). The collective bargaining agreement(s) may provide for a procedure of consultations/negotiations, which must be followed.  
• information to the EWC. 
• Information to the employees. The employees at the target have a right to refuse to be transferred and must be informed properly. If so, their employment is not transferred, and instead they have a risk of being terminated due to redundancy in accordance with mandatory Swedish law. Prepare wording of individual letters to the concerned employees confirming the change of employer. 

Inform/Notify 

• the trade union(s) and call for consultations/negotiations in due time. 
• the EWC. The information shall be provided at a time, in a manner and with content, which enables employee representatives to make a careful assessment of the possible consequences. 

Consult 

• with the trade union(s). The consultations/negotiations with the trade union(s) must be conducted and concluded before any decision on the matter is made. Although the Swedish term would be translated to negotiation rather than consultation, the trade union(s) do not have any veto rights to the decision.  
• with the EWC. Consultation takes place through the establishment of a dialogue and exchange of views between the seller and the EWC at a time, in a manner and with content that allows the EWC, on the basis of the information received, to comment on the proposed measures within a reasonable time so that they can be considered in the decision-making process by the seller. 

Implement 

• after conclusion of consultations/negotiations. For the consultations/negotiations to be considered concluded, the minutes must be signed by both parties. 
• hand over the letter to the employees. Give them one week to decide if they want to stay with the seller.  
• the decision to transfer assets. In principle, all collective and individual working and salary conditions are maintained after the transfer. The transfer, in itself, may not lead to dismissal or a (unilateral) change of working conditions. After the transaction, the seller and purchaser remain liable for any obligations of the seller, which existed prior to the transaction. 

Check  

• whether the asset deal entails a transfer of undertaking, business or part thereof in relation to the EU Directive on Transfer of Businesses. If so, whether any key employee(s) objects to being transferred to the purchaser and thus are not being transferred.  
• whether the purchaser is bound by a collective bargaining agreement. If not, check which trade unions have members concerned by the asset deal. The purchaser must consult/negotiate with the trade union(s) with which the purchaser is bound by a collective bargaining agreement. If the purchaser is not bound by a collective bargaining agreement, the purchaser must consult/negotiate with all trade unions that have members concerned by the asset deal. 
• whether in the event of a transfer of the assets of a company or a part thereof, employees are involved in the targeted part of the company on a structural basis; 
• working conditions deriving from individual and/or collective bargaining agreements (including pension schemes) are applicable to the employees affected by the transfer. 

• whether the target is bound by a collective agreement. If so, assess whether the purchaser should require the seller to terminate the collective agreement prior to the asset deal. There are specific rules regarding applicable collective bargaining agreements when they differ between the parties. The purchaser’s entire business risks becoming bound by the collective agreement of the target after the transfer, and such consequences can be avoided by proper due diligence of the collective bargaining situation at the target. 
• whether any risks are identified during the due diligence process carried out on the target company, such as invalid/unusual/unfair terms in individual employment agreements or collective bargaining agreements (regarding notice period, bonus, commission, non-competition clause and/or non-solicitation clauses, etc.), and there are any former employees with the right to re-employment or any other actual or potential claims towards the target. 
• whether the purchaser has a European Work Council (EWC). If so, check whether the purchaser has an obligation to provide information to and consult with the EWC due to the asset deal. 

Prepare 

• and adapt the Purchase Agreement in order to address the risks identified in the due diligence carried out. 
• information to the trade union(s). The collective bargaining agreement(s) may provide for a procedure of consultations/negotiations, which must be followed. 
• information to the EWC. 
• information to the employees. 

Inform/Notify  

• the trade union(s) and call for consultations/negotiations in due time. 
• the EWC, information shall be provided at a time, in a manner and with content, which enables employee representatives to make a careful assessment of the possible consequences. 

Consult 

• with the trade union(s). The consultations/negotiations with the trade union(s) must be conducted and concluded before any decision on the matter is made. Although the Swedish term would be translated to negotiation rather than consultation, the trade union(s) do not have veto rights to the decision.  
• with the EWC, consultation takes place through the establishment of a dialogue and exchange of views between the purchaser and the EWC at a time, in a manner and with content that allows the EWC, on the basis of the information received, to comment on the proposed measures within a reasonable time so that they can be considered in the decision-making process by the target. 

Implement   

• after conclusion of consultations/negotiations. For the consultations/negotiations to be considered concluded, the minutes must be signed by both parties. 

• the decision to transfer assets. In principle, all collective and individual working and salary conditions are maintained after the transfer. The transfer, in itself, may not lead to dismissal or a (unilateral) change of working conditions. After the transaction, the seller and purchaser remain liable for any obligations of the seller, which existed prior to the transaction. 

Swedish employment law equates a merger with a transfer of undertaking (see section B above).