Introduction
Mergers and acquisitions (M&A) are drivers of economic growth. In India, the deal-making landscape hit a record 551 deals valued at over $19 billion a 57% surge in volume, reflecting rising investor confidence. While M&A fuels corporate restructuring, growth, and expansion. Benefiting shareholders, promoters, and founders, we often overlook the most vital stakeholders in a company’s functioning, which are the employees

The employee during such a transaction often faces issues such as job insecurity, changed employment conditions, cultural differences, and for all this, there exists a limited recourse under the Indian law. The primary rights of employees during such a deal are governed by the Industrial Disputes Act 1947. There are various issues associated with the current framework which do not provide adequate protection that an employee should be given.

The learnings for better law can be derived from the EU Laws, which primarily govern cross-border M&A activities. EU law contains two of the most fundamental mechanisms that protect the rights of the employee, enshrined in the transfer of undertaking and the directive on collective redundancies. This tool provides various advantages, such right of consultation, being informed of protection against dismissal when there is our large number of employees who are absent from the Indian framework.

Firstly,​‍​‌‍​‍‌​‍​‌‍​‍‌ this paper will review the laws that secure the rights of workers during M&A in India and also sketch out some court decisions that have exposed the weaknesses of this protection in practice. After that, it will study the legal stance of the European Union concentrating on the main directives and the employee rights and compare the two legal systems to find the similarities and differences. Lastly, it will present the future roadmap by listing the changes that India could implement to develop a more friendly and cooperative M&A environment with the employees at its ​‍​‌‍​‍‌​‍​‌‍​‍‌centre.

Section 25FF: Promise Without Protection
In the Indian context, the treatment of employees during an M&A transaction is primarily governed by Section 25FF of the Industrial Disputes Act, 1947. Such​‍​‌‍​‍‌​‍​‌‍​‍‌ a provision specifies that in case a transfer of a business happens, if a worker has been working continuously for at least one year, then this employee is entitled to a compensation that is of the same nature as what is provided for in Section 25F of the same Act. The transfer is going to be considered as retrenchment, if the three cumulative conditions are not satisfied: (i) the workman’s service is interrupted because of the transfer, (ii) the post-transfer terms and conditions are of a less favourable nature, and (iii) the new employer is liable to pay the workman in case of future retrenchment, as per the contract. In case any of these conditions is not met, the transferee will be the one to pay the compensation.

At face value, the provision seems to be employee-friendly, aiming at guaranteeing a smooth transition as well as monetary protection in case continuity is disrupted. Its implementation, however, has not been successful in achieving this goal for the most ​‍​‌‍​‍‌​‍​‌‍​‍‌part.

One illustration of this is the Jet Airways merger, where employee salaries were cut, and many were sent on leave without pay. In fact, their services were not terminated, and they were later brought back, but the conditions of their return were much worse, and there was no way to appeal. Some employees who were retrenched also made a call for their rightful provident fund and gratuity payments, which were delayed for months.

The​‍​‌‍​‍‌​‍​‌‍​‍‌ case went up to the Supreme Court that supported the NCLAT’s decision giving the mandate to the company to compensate the employees with an amount exceeding ₹200 crore. The Court did not accept the company’s argument of financial distress and emphatically declared, “unpaid labour due always takes precedence.” This is a clear indication of how employees are pushed into distress because even their most basic rights are delayed, as a result of weak enforcement in such transactions, and they are forced to file a case in court to get their rights. The whole manner in which it is handled becomes lengthy and ​‍​‌‍​‍‌​‍​‌‍​‍‌tiring.

Although​‍​‌‍​‍‌​‍​‌‍​‍‌ the compensation is imposed by law, it is still met with delays and uncertainties. Affected employees are only paid a fraction of their dues or not at all if the companies are making losses during the merging process. There was a situation in the Jet Airways–Etihad acquisition, where the staff held a protest at Terminal 3 of the Delhi airport against the delayed and insufficient payment of their dues. So, as if there were no compensation arrangements, employees cannot reach it, are not informed or consulted prior to major corporate decisions, and forcibly end up on the streets to claim what belongs to ​‍​‌‍​‍‌​‍​‌‍​‍‌them.

Things​‍​‌‍​‍‌​‍​‌‍​‍‌ escalate to a level where the merger results in sudden changes in the organisation’s culture, structure, or hierarchy. The law doesn’t specify any way of dealing with these changes. It might be that everything remains the same on paper with respect to the employment contract, while in fact, the work environment changes drastically. The worker is in a situation that can be called a “no win” scenario: if he quits because of his discomfort, he jeopardizes his right to compensation; if he remains, he has to get used to a toxic or uncertain atmosphere without any help coming from the ​‍​‌‍​‍‌​‍​‌‍​‍‌institution.

The Tata Steel–Corus merger is a case in point. Employees faced cultural differences, misaligned practices, and large-scale restructuring. In​‍​‌‍​‍‌​‍​‌‍​‍‌ particular, there was a lot of disturbance among the workers, a definite cultural mismatch, absence of leadership, and poor communication between the different departments. Employees, thus, are in the middle of the fire practically, trying to get used to a system they had never heard of and in which they were not consulted and did not raise their voice.

In addition, the protection conferred by Section 25FF is only for “workmen” as per the definition given by the Act. Managerial and supervisory staff, who are also quite affected by mergers, are completely left out of this category. Consequently, a sizeable portion of the workforce is out of the reach of even the most modest legal safeguards available.

Even though India’s M&A regulations may seem to be very friendly towards employees on paper, they are lacking in terms of structure and institutional support. The limited legal scope, weak enforcement, and procedural delays that allow large sections of the workforce to be exposed during corporate dealings without any protection. A comparative analysis of the European regulatory framework in the following section will be helpful to understand how a more comprehensive and balanced employee protection regime can be implemented in ​‍​‌‍​‍‌​‍​‌‍​‍‌India.

India’s Deficient M&A Protections Through the EU Lens
The​‍​‌‍​‍‌​‍​‌‍​‍‌ EU approach to M&A agreements is much more comprehensive and transparent as compared to the Indian regulations. India labor law is still rooted in the old and limited protection perspective. In contrast, the EU legislation establishes a consistent and forward-looking juridical framework, which doesn’t see employees only as those impacted but also as co-stakeholders in the business ​‍​‌‍​‍‌​‍​‌‍​‍‌transactions.

Firstly, Article 1 of the EU TUPE Directive is relevant to any transfer of a business and it is a provision that extends protection to all employees, irrespective of their category. On the other hand, Indian law has confined such protection only to “workmen” under Section 2(s) of the Industrial Disputes Act, 1947, thus, it does not cover employees in managerial or administrative roles. Therefore, a considerable portion of the Indian workforce is left out and does not have the necessary legal protection during corporate transactions.

Secondly, the TUPE Directive ensures the preservation of employment terms after a transfer. All rights, duties, and obligations with the previous employer continue under the new one, which ensures employee security. On the other side, Section 25FF of the Industrial Disputes Act only obliges the transferee to provide “terms and conditions of service which are no less favorable” than ​‍​‌‍​‍‌​‍​‌‍​‍‌before.

The​‍​‌‍​‍‌​‍​‌‍​‍‌ expression that has been utilized here is extremely ambiguous and generally too broad, particularly if one were to make a comparison with the EU framework. The Indian rule just outlines that the conditions should not be “less favourable” but does not clarify what is considered favourable or not. As a result, this causes perplexity and gives the opportunity for considerable flexibility in the interpretation, and it is most often that such big corporate leviathans are the ones who take advantage of employees at their ​‍​‌‍​‍‌​‍​‌‍​‍‌expense.

Thirdly,​‍​‌‍​‍‌​‍​‌‍​‍‌ the TUPE system significantly limits the cases of dismissals caused by a transfer. Employers are not allowed to terminate employees solely due to the transfer, for which a very strict standard is set for dismissals that are only on “economic, technical, or organisational” (ETO) grounds, with the burden of proof on the employer.

On the contrary, Indian law does not set any particular limits for the number of dismissals. Its provisions are general, and there is no precise standard for termination. The point that is mainly focused on is the procedural aspect of the regulation, such as the giving of a notice and the payment of a compensation, rather than the reason for the dismissal being examined. The vagueness gives employers broad powers and offers very few protection to ​‍​‌‍​‍‌​‍​‌‍​‍‌employees.

Fourthly, the TUPE Directive mandates employers to inform and consult employee representatives before a business transfer. It makes the employees aware of the transfer, the changes which the transfer would bring, and how they will be affected, thereby ensuring that they are not left out. This is supported by the EU Directive on Collective Redundancies, which is closely linked with the directives and encourages active dialogue with unions to work out any solutions and measures for the employees.

Contrastingly, India does not have any mandatory consultation provision that applies to workmen or non-workmen. While Section 25N of the Industrial Disputes Act requires prior government approval for the retrenchment of over 100 workers, it does not require employers to give reasons for the transfer or to engage in an active dialogue with employees. As a result, Indian employees are often informed only after the completion of the transaction, thereby limiting their participation in the whole process.

A key example of the EU system’s strength is the British Airways–Iberia merger under IAG. Although initially raising concerns over job losses, strong TUPE enforcement and union involvement ensured employment continuity, minimal redundancies, and genuine consultations that took the interests of employees into account. This is an example of how efficiently regulated legal safeguards can be used to reconcile the needs of the business with those of the employees which are the features that Indian law is still lacking. ​‍​‌‍​‍‌​‍​‌‍​‍‌

Way forward
India​‍​‌‍​‍‌​‍​‌‍​‍‌ is not required to imitate the EU model completely; however, it should still absorb the fundamental principles of the Union. The next step involves creating a more inclusive system that offers legal protection to non-workmen categories, requires employer–employee consultations during transfers and sets out more exact dismissal criteria.

Such provisions will make sure that workers have the right to redress and access to information, thus they will be able to make their own decisions, particularly in situations where companies are mostly driven by their own profit and growth.

By supporting a participatory and rights-based legal framework, the confusion of employees during company changes will be reduced, as well as the long-term organisational positions will be strengthened, and fairer corporate governance will be ​‍​‌‍​‍‌​‍​‌‍​‍‌promoted.

Conclusion
In​‍​‌‍​‍‌​‍​‌‍​‍‌ sum, India’s present judicial framework gives minimal and mainly procedural safeguarding to staff in situations of M&A. The legislation like the Industrial Disputes Act may be in place, but it is mainly focused on “workmen” only and is deficient in aspects of explanation, inclusion, and implementation of corporate transactions. The fast-paced M&A scenario exposes a huge hole in the protection of the people who are the real contributors of economic value, i.e., the employees.

The EU model under the Acquired Rights Directive is, by far, a better-structured system in this respect. It requires certain definite safeguards such as the continuation of the contract, employee consultation, and reasonable dismissal ​‍​‌‍​‍‌​‍​‌‍​‍‌criteria. Although India’s labour market differs, the core principles of participation, clarity, and fairness remain significant, which can be incorporated into India’s framework.