Transfer Issues and Employment Diligence in Mergers and Acquisitions

Transfer Issues and Employment Diligence in Mergers and Acquisitions

In a Bloomberg Law article, Rebecca Stuart from Sidley Austin highlights best practices focusing on transfer issues and employment diligence in mergers and acquisitions (M&A). With M&A, understanding employees’ rights and obligations is crucial for success.

Employment diligence in mergers and acquisitions involves reviewing a company’s workforce, employment contracts, compensation structures, benefits programs, and compliance with labor laws. Identifying potential liabilities early on can significantly impact the transaction’s value and success.

Stuart notes these key practices in the article:

1. Employment Diligence:
   • Employment Contracts: Review for non-compete clauses, severance agreements, retention bonuses, and arbitration provisions.
   • Compensation and Benefits: Analyze structures to align with acquiring company policies, revealing potential litigation risks.
   • Labor Laws: Ensure compliance with local, state, and federal laws, including proper employee classification and policies on harassment and discrimination.
2. Contractual Obligations: Identify key employees early, understanding their contractual obligations, especially change of control provisions, to draft new employment agreements. This is vital for ensuring continuity and post-closing operations.
3. Employee Transfers: Negotiate and detail employee transfers in the definitive agreement to avoid disputes. Provide offer letters for employees transferring post-closing, outlining compensation and benefits. Consider federal and state laws for terminations and cross-border complexities for international transactions.
4. Non-Competes: With non-compete agreements under scrutiny in the US, consulting experienced labor lawyers ensures compliance with evolving regulations.

Consulting knowledgeable employment counsel is essential to navigate these complexities and mitigate risks, ensuring a successful transaction.