SAN FRANCISCO — While HR and employment law attorneys may not have much say when it comes to mergers and acquisitions, they can be an invaluable resource and help employers remember to ask some important questions during the process, experts said during the American Bar Association's 12th Annual Labor and Employment Law Conference.
These moves are naturally about money, but to ensure changes go smoothly, it's crucial that employers remember to think about the employees involved, panel members said. To do so, those involved in managing talent can ask the following questions, they said.
Is it really better to be larger?
In the early stages, HR can ensure that higher-ups have thought through all of the potential effects of a merger or acquisition, Jonathan Ben-Asher of Ritz, Clark & Ben-Asher said. Is it better for the culture and values? Will there be layoffs? If so, will there be severance? How will we deal with the effect on morale?
Before any news is announced, HR will need to have a plan in place to quell workers' concerns. If you don't give employees a sense of job security and compensation security, you'll lose your best employees, said Marianne Goldstein Robbins of The Previant Law Firm, S.C.
Donna M. Hughes of Bedminster, New Jersey, agreed with the others: "Be sure to protect your most valuable asset," she said, "or you'll never achieve the financial promise of the transaction."
Do we need retention agreements?
Retention agreements can prevent key employees from leaving before or during mergers and acquisitions. Often, they're offered to those with specialized skills or knowledge, or those with good relationships with important clients, Ben-Asher said. They don't have to be complex and generally merely provide a bonus if an employee stays through a certain date, he explained.
Hughes, however, cautioned that retention agreements should be agreed to in the merger or acquisition agreement, as they can be quite expensive. Additionally, ensure that they're offered for bona fide business reasons. Co-workers are going to wonder why they didn't get one, and employers need to be sure there's no discrimination at play, she said.
Is there a union involved?
If you're working with a unionized employer, you may have a "duty to bargain," Robbins pointed out. And if you're the purchaser, you'd likely be bound by their collective bargaining agreement.
Additionally, it's important to know how you'll merge unionized workforces, she said. How will seniority be handled, for example?
Will we conduct an employee census?
During the due diligence process, HR can benefit from a census of the other employer's workers. "To do the best job you can, you want to get the most information you can," Hughes said. And "an employee census can be a very valuable piece of information," she said. It can tell you where people are located, for example.
It also can tell you about how the company classified workers as exempt or non-exempt under the Fair Labor Standards Act, Hughes continued. And if HR sees any problems there, potential liability needs to be assessed on the front end, she said.
HR also may want to warn others about the implications of asking for employee salary information during this process, Eric A. Tate of Morrison & Foerster LLP, said. New York's salary history ban has an exception for acquisitions, but the other ones aren't as clear; it's important to look at the statute, he said.
What do the reps and warranties cover?
HR and company lawyers can examine whether the agreement's reps and warranties provisions affect who pays for employment liabilities, Hughes said.
There's also insurance available for this, Tate noted, but it's expensive and can slow down the process as the insurance company's lawyers will need to do their own research. But as employment issues continue to make headlines, it's something employers will likely consider more often, he said.
How will we merge workforces?
A plan for merging workforces is critical, Hughes said. If not done properly and transparently, you can lose talent — or at least have distracted talent. Being clear about harmonizing benefits and culture is great (as is information about whether there will be layoffs), but employees also will likely be on edge about day-to-day things.
HR can alleviate some anxiety for employees by giving them information about what their jobs will look like on day one, day 60, day 90, etc. They want to know whether they'll be subject to the same policies and whether they'll have the same manager, Hughes said; they want to know if they'll park in the same parking lot and if their same badge will still work — and they need to know as soon as possible.
Since the #MeToo movement took hold, Tate said he likes to ask employers what they've done in response. He asks about their practices and find out what their training looks like, he said. It's also an opportunity to find out more about whether there have been any issues with company executives, and how those were handled.