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Looking to do business abroad? In this SourceMedia video sponsored by CT Corporation, Goodwin’s Laura Hodges Taylor delves into the importance of doing your homework before taking the leap. She describes key differences in labor regulations between the U.S. and Europe, and what sort of legal constraints you may face.
Does this deter private equity firms from doing deals in Europe?
On the expense side European countries tend to have substantially more employee-favorable practices in terms of benefits and social welfare programs. The costs to an employer are also significant, both to maintain those programs and generally to protect the employees.
There are constraints on terminating or severing an employment arrangement, particularly if there is an employment agreement in place. Then on the compensation side it is generally more complicated to put together a program that resembles what we do in the U.S. So, they don’t necessarily, in all European countries, favor stock option plans and restricted stock plans. They have other kinds of benefits and incentive programs that are different and are typical.
We really advise people to get a good understanding before they start figuring out what they can do from an employee perspective in the context of a transaction—to really understand what the costs are going to be and what the commitment is in some of the ancillary benefits that they will have to plan for.
Almost all constraints that relate to employees—and frankly most of the legal issues—really just require advanced planning. You just have to think ahead. You just have to not assume you can barrel down with your U.S. way of doing things and have that all fly, because it won’t.
Are there legal constraints under U.S. law for U.S. companies doing business abroad?
Yes, there are laws obviously. There are all sorts of obvious issues like how you structure a transaction. Are you structuring your business abroad? Tax structuring is extremely complex. There are employee issues that need to be taken into account. There are intellectual property differences in terms of how intellectual property is protected in the EU, for example, compared to the U.S. There are anti-competition and anti-trust issues that need to be addressed, data security. And data privacy, which has been in the news a lot lately, is another important area. Then there are a raft of U.S. rules relating to engaging with foreign companies and persons.
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