Toronto Employment and Labour Blog: Sure Signs You Are About To Be Fired - Sign #6

SIGN #6 - MERGER MANEUVERS

You’ve heard that the company is going through a restructuring that will affect your position, yet your superior has said nothing about it.

Relying on rumors increases anxiety and blood pressure, but provides little useful information upon which one can take action. It is not unusual, during internal restructuring or merger discussions, that hard information is difficult to find. Meetings are confidential until final action is determined. The select few involved are most discreet about revealing the nature of the discussions in order to maintain freedom of action. If too many know too soon, management may face a reaction that limits their options.

If it appears that fundamental change is inevitable, then the only real question is what impact organizational change will have on you and your future. Under these circumstances preventive planning is essential. Inevitably mergers and restructurings result in job loss. It can become a desperate game of musical chairs to determine who stays and who is forced to leave.

There is protection available to those astute enough to take action. The protections available increase with the perceived value of the employee requesting them. If an employer fears the potential departure of a key employee because of that person’s concern about the consequences of a merger or a restructuring on her position with the employer, that same employer is motivated to allay the employee’s fears by taking concrete steps that provide some reassurance.

The chance that a key employee will jump ship and go elsewhere in anticipation of a negative change or even job loss is something a concerned employer wishes to avoid. Most employers wish to maintain continuity of employment, particularly during corporate change that could lead to employment and even leadership disruption. This presents an ideal opportunity for the executive employee to make a deal. Rather than contemplate losing a key employee at a critical time of corporate readjustment, the employer is motivated to guarantee a severance package to the employee or to those employees needed by the organization during the transition. In exchange, the employee will guarantee her continued employment – at least over the term of the anticipated disruption.

For example, a small company of 50 employees is being merged with a competitor over a six-month transition period. Although job loss will result from the merger, it has not yet been determined the number of employees who will be cut and the number who will stay. It is clear that certain key employees will be needed in any event to see the transition through to a successful completion. Those individuals required over the transition period are usually the most mobile, that is those who could probably find a job elsewhere with the least difficulty. In order to guarantee that a number of the key employees remain in place until the merger is complete, the company enters into a “continuity agreement” with eight key executive employees that guarantees them severance amounting to between 12 and 24 months’ compensation if these same employees agree that they will not leave the company until the merger is complete, some seven months later. If, after the seven months have expired, and their employment is terminated, or they resign for specified reasons, the severance package is theirs. If , however, they leave the employer prior to the expiry of the seven-month term, they are entitled to nothing, apart from payment of salary up until the date of their departure.

Normally, if they leave either before or during the merger, they are not entitled to any compensation. The key employees, as part of their agreement to stay on for at least seven months, are guaranteed on their termination or resignation within a reasonable timeframe, a fixed sum of severance based on their age, years of service and level of responsibility. In this way the employees are protected and so is their employer over the time it takes to complete the merger.

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