Corporate Lawyers – Don’t Forget to Include Me when Structuring Buy/Sell Agreements

The General Counsel of the National Labor Relations Board has made it a top priority to force purchasing companies to recognize the labor unions in place at the selling company. While there are legal ways to craft the buy/sell agreement to avoid becoming a “successor employer,” the NLRB is actively seeking to catch companies that do not dot every “i”and cross every “t.”

Since the penalty of not including labor lawyers in the selling or purchasing process is severe, corporate lawyers must assess what, if any, labor obligations exists before the closing occurs. For example:

• Is any part of the seller’s workforce represented by a union?
• Is the buyer obligated to recognize and bargain with the union(s) representing the seller’s employees?
• Is a collective bargaining agreement in place? If so, is the buyer compelled to assume the seller’s collective bargaining agreement?
• Can the buyer set the initial terms and conditions of employment?
• Has the buyer, through words or actions, forfeited its right to set initial terms and conditions of employment?
• Is there any evidence or indication of threatened or pending organizing activity, petition(s) for recognition, or labor strikes?

The answers to each of these questions is extremely fact specific and may affect the buyer’s strategy, risk assessment, terms of any purchase and sale agreement, and even the decision whether to buy the company. Involving labor counsel in the corporate transaction from the beginning is the best, most prudent way to protect your client’s interests.