As a follow up to the April 29, 2014 audiocast presented by lawyers from the California HR team on the “Impact of Mergers & Acquisitions on California Employers,” the presenters have shared their most important “take-away” thoughts from the presentation. We hope you find these tips useful.
From Summer Conley (Counsel, Employee Benefits & Executive Compensation):
- Sellers should be wary of creating a MEWA when agreeing to provide transitional health coverage for the buyer. In California, self-funded MEWAs are generally not permitted.
- While the buyer and seller may contractually agree who will take on COBRA obligations, ultimately the regulation controls.
- Small companies looking to make an acquisition will need to consider whether the acquisition will cause them to become an applicable large employer subject to the employer shared responsibility mandate.
From Pascal Benyamini (Partner, Labor & Employment):
- The seller should ensure compliance with wage and hour laws. For instance, in California, in an asset deal, the seller may be subject to Labor Code Section 203 penalties even if the buyer hires all of the sellers’ employees.
- In a stock deal, the buyer should conduct a careful and thorough due diligence to identify any non-compliant policies and practices of the seller to minimize the risks of potential claims.
- California has several unique leave of absence policies depending on the size of the company and buyers should be wary of such policies in any deal.
From Heather Abrigo (Counsel, Employee Benefits & Executive Compensation):
- Make sure that you have a proper due diligence process in place or hire ERISA counsel to assist with employee benefit issues as they can impact when a deal can close.
- Plan sponsors may want to consider terminating a retirement plan depending on whether it is an asset sale or stock sale.
- Look to make sure you have determined whether there are any controlled group and/or affiliated service group issues that could impact benefit liabilities, compliance testing and underfunded defined benefit plan issues.
From Mark Terman (Partner, Labor & Employment):
- Because California courts are generally hostile to agreements imposing non-compete and non-solicitation requirements on non-owner employees, buyers and sellers should evaluate the agreements before relying on them, and look to confidentiality agreements and trade secret protection programs for preservation of business value.
- California has its own WARN (Worker Adjustment and Retaining) Act which requires employers with 75 or more employees to give 60-days‘ advance notice of a mass layoff, relocation or termination of employment. Exceptions in the M&A context are limited. Sellers and Buyers should address and allocate legal responsibility for wages and benefits of affected workers if required notice is not given.
- As with any mass hiring or reduction in workforce, reduce potential claims of unlawful discrimination by focusing decisional analysis on the work to be done, the skills needed to do the work, and who has the skills. Be sure to also screen for disparate impact on workers in protected classes.
If you didn't have a chance to hear the presentation, you can access it here.
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