Restructuring

‘Restructuring’ is a term used to describe a multitude of different forms of re-organising the activities of the enterprise, many of which have serious consequences for the workforce in terms of levels and terms and conditions of employment. The issue has become increasingly prominent with the substantial rise in corporate restructuring, particularly internationally, and because of significant national variation in the rights of employees in mergers and acquisitions and restructuring generally. The impact of corporate restructuring on employment and industrial relations differs from country to country, not least as a result of different regulatory frameworks. The EU has already adopted a number of measures to provide protection for employees and information and consultation rights in the event of the restructuring of enterprises. Directives already concerned with restructuring deal with collective redundancy, transfer of an undertaking, European Works Councils, information and consultation and the European company. In addition, Regulation 4064/89, amended by 1310/97 and Regulation 447/98, requires the approval of the Commission’s competition authorities in cases of concentrations with a Community dimension, and allows recognised worker representatives in the companies concerned, if they apply, to be consulted by the Commission during its assessment.

As part of the process of social dialogue, the European Commission began consultations with the EU-level social partners in January 2002, under Article 138(2) EC (now Article 154 of the Treaty on the Functioning of the European Union, TFEU), about how to anticipate and manage the social effects of corporate restructuring, aiming to conclude agreements on this issue at cross-industry or sectoral level. On 8 March 2002, UNICE (now BUSINESSEUROPE) issued a statement saying that while regulatory constraints should be avoided, ‘there could, however, be value in organising exchanges of experience on companies’ practices for anticipating and managing change’. The ETUC issued a statement on 12 March 2002, stating that while social dialogue on best practice was important, it was not enough and the Commission and the Council should not give this responsibility to the social partners alone. The social partners subsequently agreed a joint text entitled ‘Orientations for reference in managing change and its social consequences’ (11–12 June 2003). It contains guidelines to be followed in order to ensure successful change management, covering transparency, good-quality communication, and information and consultation at different levels. In early April 2005, the European Commission initiated the second stage of formal consultations with the EU-level social partner organisations under Article 138(3) of the EC Treaty (now Article 154 (3) TFEU) on the related issues of handling restructuring and enhancing the role of EWCs. The Commission published a Communication, ‘Restructuring and employment (184Kb PDF)’, setting out measures to be developed or strengthened with the aim of facilitating ‘anticipation of change’ and ensuring improved management of restructuring within the EU.

As proposed in the Commission’s consultation paper, a Restructuring Forum and an ‘internal restructuring task force’ were put in place. The European Monitoring Centre on Change (EMCC) uses its monitoring instrument, the European Restructuring Monitor (ERM), to provide up-to-date news and analysis on company restructuring in Europe. The EMCC identifies cases characterised by more imaginative and reflective approaches to deal with the social effects of industrial restructuring, avoiding layoffs and retaining valued human capital. Training breaks, sabbaticals, job-sharing, remote working and reduced working hours, as well as the take-up of maternity leave and parental leave, are part of what is called ‘reflective restructuring’. Reflective restructuring takes into account the existing overlap between economic, social and environmental issues in each restructuring case.

The EMCC distinguishes between eight different types of restructuring:

Relocation: when the activity stays within the same company, but is relocated to another location within the same country. This differs from outsourcing in so far as the activities which are transferred do not belong to an ‘integrated system’ of a broader production (i.e. supply chain).
Outsourcing: when the activity is subcontracted or contracted out to another company within the same country. It is the act of transferring some of the company’s recurring internal activities and powers of decision to outside providers.
Offshoring/delocalisation: when the activity is relocated or outsourced outside of the country’s borders. The offshored activity may either continue to be owned by the company or may be offshore outsourced.
Bankruptcy/closure: when an industrial site is closed or a company goes bankrupt for economic reasons not directly connected to relocation or outsourcing.
Merger/Acquisition: when two or more companies decide to transfer their assets into a single company or during an acquisition which then involves an internal restructuring programme aimed at rationalising the organisation by cutting personnel.
Internal restructuring: when a company undertakes a job-cutting plan which is not linked to another type of restructuring defined above.
Business expansion: when a company extends its business activities, hiring new workforce.
Other: when a company undergoes a type of restructuring that is not one of the above types.

Please note: the European industrial relations dictionary is updated annually. If errors are brought to our attention, we will try to correct them.

Page last updated: 30 November, 2010

^Back to top of page