New life-sciences park saves hundreds of research jobs

Agreement has been reached over the reorganisation of Organon, a subsidiary of global pharmaceuticals company Merck. It follows Merck’s announcement in July 2010 that all its research activities in the Netherlands would end and that production would be reduced by 30%. This was expected to result in the loss of 2,175 jobs. However, there was strong resistance from workers and the parties involved have now agreed to establish a life-sciences park to try to retain some jobs.

Details of announcement

On 21 June 2011, it was announced that agreement had been reached between global pharmaceuticals company Merck and the Dutch government to retain some of the jobs at the research centre of its subsidiary Organon, based at Oss in the Netherlands. The agreement includes the establishment of a life-sciences park to employ the 540 researchers who will be dismissed from Merck. Of the remaining researchers, 100 will join Merck’s production team and 486 will remain in service.

Merck has earmarked €40 million for the park’s establishment. This is half the cost; the other half will come from the Province of North Brabant and the municipality of Oss. The researchers will be able to continue their research work with their own company within the park. In so doing, they will be supported by Brabantse Ontwikkelingsmaatschappij (a development company) and a taskforce made up of representatives from government and the business community. More than 90 business plans have now been submitted to this taskforce.

Background

Acceptance of this so-called Plan B by the parties involved marks the end of a turbulent year. This began on 10 July 2010 when Merck announced that all research activities in the Netherlands would end and that production would be reduced by 30% with the loss of 2,175 jobs. This led to resistance from employees, the works council, trade unions and the company’s supervisory board. The works council, which enjoys advisory powers on decisions affecting the future of the company, said it would lodge an appeal with the Enterprise Section of the Amsterdam Court of Appeal. The supervisory board also reminded Merck’s management of its right of approval for any far-reaching proposals, including reorganisation of the company.

Hundreds of jobs had already been lost at the company in 2007, when Organon’s former parent company AkzoNobel decided to sell the company to Shering-Plough, instead of listing it on the Stock Exchange. Soon after this, Organon was taken over by Merck.

New owner defers intended reorganisation

In the face of such opposition, Merck deferred the reorganisation. An advisory board was established with representatives of all the parties involved, and it was given until the end of December 2010 to look for alternatives. This period was extended by six weeks in December. During this time, Merck conducted exclusive negotiations with ‘Party X’, which was probably the South African company Aspen. However, Merck withdrew from these negotiations in mid-February 2011. The works council, trade unions and supervisory directors then initiated preliminary relief proceedings. They demanded that Merck reach agreement with Party X on a takeover of the research department.

Court orders Merck to reopen negotiations with Party X

While the court rejected this demand, it did rule that Merck had acted unlawfully by not consulting the advisory board before ending negotiations with Party X. Merck has been instructed to reopen negotiations. This ruling ties in with the history and practice of Dutch co-determination law which allows the entrepreneur a degree of leeway in terms of policy but insists on a number of procedural, due-diligence criteria. The entrepreneur must furnish sufficient information, properly activate intended decisions, meet commitments and demonstrate how employees will be compensated for the consequences of decisions. This procedure was not adhered to in this case.

Robbert H. van het Kaar, University of Amsterdam (HSI)

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