An overview of the relationship between corporate and employment law
Michael Skaarup
France
by Michael Skaarup
Corporate and employment law are two distinct areas of law, but they often intersect. Both play essential roles in governing the relationships between businesses and their employees. Understanding both legal domains is crucial for anyone involved in business operations or management.
Navigating within these legal fields, I want to share the many links between them. This article will explore briefly interactions and practical applications of corporate and employment laws.
While corporate law primarily focuses on the organisation and business functions at a structural level, employment law ensures that employees are protected and treated fairly within that framework. The two areas of law must work in close coordination to ensure businesses operate effectively and avoid potential liabilities. Let’s explore several key interactions.
Corporate law and employment law, though distinct, are in fact closely linked in various business processes, particularly during corporate restructuring, mergers and acquisitions (M&A), and the establishment of corporate governance structures. These areas of law must work in tandem to protect both the company and its employees while ensuring legal compliance.
One of the most significant areas of intersection between corporate and employment law occurs during M&A. It significantly affects not only shareholders and board members, but also management and employees (e.g. during due diligence, transfer setup, redundancy, etc.).
Corporate restructuring frequently involves decisions that directly affect employees’ positions, salaries, and job security. Employment law requires usually that companies consult with trade unions or employee representatives in advance of major changes.
The size of the company or the structure of the corporate group may lead to different processes and discussions with employee representatives. Employment law at a group level can be a concern depending on the restructuring project.
Corporate law governs the distribution of shares, dividends, and other financial aspects, while employment law regulates employee benefits, retirement plans, and stock options.
Corporate social responsibility is a fairly new area where corporate and employment law intersect, particularly in how a company’s ethical standards and social practices affect its employees.
A company is directed and controlled by corporate governance rules and practices. Employment law often intersects in relation to the terms of employment contracts (e.g. executive compensation and benefits).
Corporate and employment law also intersect in the regulation of workplace health and safety. While corporate law provides the framework for the business entity, employment law focuses on workers’ protection. Governments regulate the health and safety of workers subject to corporate compliance.
Health and safety 'is an important area of potential liability for legal representatives. In case of a workplace accident, liability may be on a criminal level if health and safety rules have not been followed properly.
While corporate and employment law govern separate but intertwined areas of business, they often interact at various points during the life cycle of a company, from incorporation to restructuring. Both legal fields will follow and adapt to changing realities, global markets, technological advancements, employees’ expectations, and evolving economic landscapes, resulting in future interactions and links.
XLNC member firm ELTEA AvocatsParis, FranceT: +33 1 87 89 61 75
Michael Skaarup is a partner at Eltea Avocats and head of the firm’s Danish Desk. He specialises in labour, social security and social protection law, corporate law, M&A, restructuring, distribution, and transport. He advises French companies and subsidiaries of Danish, Scandinavian, and European groups on their projects in France. Contact Michael.
