Global legal gotchas

Here's the strategy for expansion: Buy a competitor, and use its equipment and your own people to grow the business.

It's a straightforward plan, and one that's put into motion all the time. And although layoffs are an inevitable part of the transaction, dismissed workers rarely derail the plan -- at least not in the U.S. But in Europe, where labor laws demand many more concessions from companies looking to shed jobs, they just might.

Such are the unexpected dangers of doing business around the globe.

Seasoned managers are well aware that laws and regulations vary from country to country, yet lawyers and IT executives acknowledge that there are some areas that can trip up even experienced pros. They range from navigating the nuances of labor laws to negotiating procurement deals. And although CIOs are reluctant to admit their missteps, experts say many companies discover legal traps only after they fall into them.

That's all the more reason to get a handle on potential pitfalls in advance, experts agree.

"When you have a team around the world, you have to know exactly what laws you're dealing with," says Stephen Pickett, a CIO and president of the Society for Information Management.

Here are seven key areas to watch out for.

1. Labor relations

Lawyers point to labor as one of the thorniest issues facing American executives working in Europe. And if you think only HR execs need to worry, you're wrong. CIOs who are downsizing or outsourcing could easily find themselves in tricky situations.

Melise R. Blakeslee, an attorney in the intellectual property, media and technology transactions group at law firm McDermott Will & Emery in Washington, says one of her clients learned that the hard way.

The U.S.-based Internet services company bought a European counterpart, with plans to replace the European workers with its own. But the IT workers at the European firm quickly pointed to their legal rights, and in the end, the U.S. company had to hire some and pay off others.

Some CIOs are also surprised by the presence -- and power -- of staff or work councils, says Jay Crotts, an American who works in London as CIO of Shell Lubricants/B2B, part of Netherlands-based Royal Dutch Shell.

"If you want to do a reorganization [or] downsizing or change the terms of their employment, such as location, you actually go to [the councils] with the request for advice," he explains.

Employee councils, which enjoy particularly strong legislative support in France, Germany and the Netherlands, can come back with support for a plan or questions about it. They can even delay action, Crotts says.

2. Privacy

European laws require much higher levels of data security and privacy, even as they apply to accessing employees' information. For CIOs familiar with only U.S. requirements, such restrictions may seem daunting.

"IT people are constantly surprised that their systems have to be adjusted to accommodate data protection, data transmission or other security issues," says Mark E. Schreiber, chairman of the privacy group and a partner at Edwards Angell Palmer & Dodge.

CIOs need to have systems that protect data and prevent illegal transfers of information, even within the company, Schreiber explains. For example, European privacy laws could prevent an HR official in France from e-mailing salary information to the CEO in London, even though such data-sharing is perfectly acceptable in the U.S.

Consider, Crotts says, that when compiling a list of its project people and their skills, his company first had to get employees to sign forms saying it was OK for their data to be used in such a manner.

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