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Labor Troubles to Avoid in Sale

“Labor Troubles to Avoid in Sale”

During the purchase of a business, financial terms are usually the focus. But labor issues should be squarely faced before a deal is inked.

  1. Severance and benefits quickly come into play. Terminated workers often see informal policies as inviolable while the buyer does not.

    Seller’s tip: To shore up protection from ERISA-based claims by fired workers, adopt written rules limiting severance upon the sale.

    Buyer’s tip: Negotiate with the seller up front who pays severance.

  2. Collective bargaining pacts protect union employees from altered working arrangements and can apply even if a buyer purchases only assets. Courts can, in fact, impose "successor involuntary liability."

    What the Supreme Court says: When the buyer wants to lay off the entire workforce or substantially change operations, it need not bargain with the employees’ union. But the buyer might still be liable if it fails to meet the Supreme Court’s tests.

    Key questions: What agreements are in place? What are the implications, especially for bargaining?

  3. Discrimination. Older workers are successfully challenging company retirement plans after large layoffs.

    Key points: To avoid violations, get expert help to analyze relevant data, such as employee ages and classifications. To reduce risk, obtain from workers releases and waivers that resolve potential discrimination claims.

  4. Warning laws may apply. U.S. employers with over 100 workers must give 60 days notice of a plant closing or 60 days severance pay.

Writer: Steven Mitchell Sack practices labor and employment law in New York City.