As M&A activity ramps up again, here are our top 5
employment issues to consider in a sale of
Offering employment: buyers have no obligation
to offer employment to a seller's employees. If they don't,
sellers are liable for termination payments, including leave and
possible redundancy entitlements on completion (unless redeployment
is possible). If you're a seller, you want provisions in the
sale agreement around the terms of employment offers, to reduce
redundancy exposure. If you're a buyer, don't risk
employing the employees on the same terms and conditions, unless
you know exactly what they are and have thought about whether that
suits your business.
Key employees: retaining key employees, having
those employees sign up to employment contracts which protect the
buyer's business interests, including considering retention
bonuses, can be critical to the success of a purchase. Investing in
change management and integration processes can maintain workplace
culture and guard against losing key employees after
Employee consent: a common mistake is the
assumption that employees can be automatically transferred between
entities. Not true. Employee consent must be obtained.
Transfer of business: if employees transfer to
the buyer and perform the same work following a sale of
business/assets, the "transfer of business" rules in the
Fair Work Act 2009 (Cth) are triggered. As a result,
applicable industrial instruments (eg enterprise agreements) and
personal/carer's leave entitlements automatically transfer to
the buyer. As a buyer, you want to know and understand what those
liabilities are going to cost you before completion.
Long service leave: the sale may trigger the
deeming provisions in the various State/Territory long service
leave legislation, in which case the buyer inherits any
transferring employees' long service leave entitlements. This
means if you're the buyer, you want an adjustment for the
contingent liability in the purchase price.
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Do not depart from the contract terms, or encourage the other party to do so, unless you plan to alter the contract.
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