The sale of a business almost always includes employees. Both parties need to understand their rights and obligations to those employees, as a sale can create significant liabilities to employers if not done properly. For example, the seller may be deemed to have terminated their employment, triggering massive severance obligations. Or the buyer may unknowingly inherit all of their seniority, along with their growing severance entitlements.
Unfortunately, this is often an issue that is left to the very end of the negotiations, when it can be of critical importance.
In one case, we advised an individual that was looking to sell his business and fortunately, we were able to speak with him before the deal was concluded and explain that his potential liabilities to his employees were almost as high as the purchase price he was hoping to obtain.
The legal implications of the transaction will depend on a few factors, including the nature of the transaction, and specifically whether it is a share purchase or an asset purchase.
If you are engaging in a share purchase, then you will essentially be stepping into the shoes of the existing employer, and accepting all of their existing contracts and obligations (including those to their existing employees). In this situation, you may not want to keep all the employees, but if you dismiss them after taking ownership, you would be on the hook for all termination costs.
If it is an asset purchase, then you do not have to take on the employees, but you may want to take some or all of them. In this context, we can work with you to negotiate strategic contracts of employment. This must be done before you take over the business, since if they continue working, you may effectively be taking on the liabilities associated with them.
How we can help with buying or selling of your business
It is critical that you work with an Employment Lawyer to understand the potential obligations that you may be taking on before you enter into any kind of agreement.
We regularly work with purchasers, often in conjunction with their corporate lawyers, in order to address these issues and ensure that they are protected before they enter into a binding agreement. These discussions should take place long before a binding agreement is signed.
We want to be your Trusted Advisor, your Chief HR Law Officer, your business partner. Let us be part of your team, so that we can look after your employment law issues, and you can focus on your business.
