Employee-related considerations play a part in virtually every business deal, including acquisitions and mergers. Regardless of whether you are on the “buy” or “sell” side of the transaction, fine employment law nuances can create substantial unintended liabilities.

On the buyer side, we often hear statements like: “It’s an asset sale,” or “They are responsible for liabilities arising prior to Closing, and we have indemnity.” Such statements exhibit the misconception that an asset sale guarantees the buyer absolution of the potential employment-related claims or debts of its predecessor. That is not necessarily the case because new employers are sometimes sued under a “successor liability” theory. And, unless the employment-related indemnity period spans at least the duration of any applicable statute of limitations (and the buyer is certain the seller will actually have the means to cover the indemnify), exposure continues to exist. Wage and hour class/collective/representative actions are typically not covered by insurance. Why? They can be incredibly expensive.

On the seller side, proper employment diligence is key to avoiding end of employment liabilities and providing accurate and complete disclosures. As one example, many sellers believe vacation/paid time off can simply be rolled over to the new employer. But some states require vacation/paid time off payout at termination of employment and/or employee consent before the new employer is substituted as the entity which is obligated to pay. Furthermore, the doctrine of “constructive receipt” may create unintended tax consequences where the employee is given the choice to get money now or in the future.

At Ascent Employment Law, we are ready to help with due diligence of employment matters related to any business deal. We can identify potential liabilities, determine whether WARN notices will be required, and analyze severance, bonus, and other benefit considerations. We also help draft retention, consulting, non-compete, and separation agreements that often arise during a merger or acquisition.