Corporate mergers, acquisitions and takeovers keep on happening. However, linking such takeover with the retention of the employees from the new company is strange. In what way employees are connected with the change of management? Since the company ownership was transferred, why they should not avail of better opportunity? Why change of management should be hindrance to their personal growth? Is this not against principles of natural justice?
What I have written above is purely out of my general knowledge. I am not a professional lawyer.
For this kind of agreement, I recommend you approaching a lawyer who is expert in corporate mergers and takeovers and also in Indian Contract Act.
20th June 2018 From India, Bangalore
In this case, it seems to be a Tripartite Agreement between the old company, their employees and the new company under a Dual Employment Agreement (DEA). The new / taking over company will pay the salary & wages for the next 1 Year to the DEA employees or till such time this contract is finally terminated.
However, the Tripartite Contract which these 03 parties to it will sign must clarify the following :
1. Payment of Gratuity for the period already served by the employees with the old company;
2. Availment of old balance of Leaves and Payment of Leave Encashment;
The old company washes off its hands from all payments after takeover; and the new company is not bound to pay any amount to the DEA employees for the period served under their old company. In such a case, the DEA employees suffer as the Full & Final Dues Settlement of the Retiring / Resignees is made Before & After the Takeover (Zero Date) by the new company; and for their past dues these employees go to their old company which now does not listen to them.
21st June 2018 From India, Khargone
In case take over and mergers, there is clause in the agreement regarding grant of continuity of service and existing benefits to the employees of the company being taken over or merged. Please check for thid
In this the new company wants them to employ only for one year which is unusual.
This will pose challenges for the employees and their willingness for that, continuity of service etc HSS to be looked into.
21st June 2018 From India, Mumbai
You may please like to clarify the exact status in the light of different dimensions/assumptions that have surfaced in the replies that have come. Otherwise some replies might come based on certain assumptions that are not relevant.
It appears that while the new employer wants to retain all employees, he wants to ensure that stability is maintained by enforcing a clause that they will be bound to continue with the Company at least for a period of one year.
What does the employer want to do if a worker does not sign an agreement to that effect? Retrench him? If yes, is it legally permissible to do so? If not, will he overlook the cases of those who don't sign the document and still proceed to ask the rest to sign it? What will he gain by doing this, except revealing his weakness and inconsistency? Is the employer entitled to refuse to absorb an individual who does not accept the one year compulsory retention clause? And even if an individual signs such document and resigns before completion of one year, what will the employer do? Can the legal rights of a citizen of India be taken away by resorting to 'contracting out' agreement?
If he wants to have stability in the workforce, would it be wise to begin the relationship in an environment of distrust? Instead, would it not be wise to develop healthy work environment wherein people would want to be with the Company voluntarily, not only for an year or so, but much beyond?
Apart from this, if he still wants to insert this clause, is he willing to make reciprocal commitment that the employee will be retained with the Company at least for one year, come what may?
If this post is brought to his notice, perhaps you may not have to worry how to get the clause in question inserted in the service conditions. Good luck!
21st June 2018 From India, Mumbai