Reps & Warranties: Employment Matters
Essential Question:
What are the dynamics between your employees and the Business?
In Brief:
Who are your employees and what is their relationship to the Business?
The context of employee/business relations is extremely important to a Buyer knowing what they’re walking into that only a Seller can provide.
Are there any outstanding claims or disputes? Have there ever been any? How were they resolved?
Category: Continued Diligence & Fact-Finding; Risk Allocation
What is it?
Two parts: 1. Define the universe of your employee base (who they are, how long they’ve been there, what they’re getting paid, titles, what they do, FLSA status, anyone on leave), including independent contractors working in the business; 2. Make statements and assurances about your proper employment classification, correct tax information, and compliance with labor and employment laws (wage and payment laws, harassment and unsafe work environment regulations, OSHA investigations, tax issues, etc.).
When does it matter?
Things to zoom in on here include any claims or disputes with any employees or groups of employees – and how they were resolved – and any unionized labor in the workforce (which produces different offshoots of representations regarding the existence of collective bargaining agreements, strikes, walkouts, and related regulations).
What to look out for?
First, it’s worth being aware of what might come up in this suite of representations, but know too that the state and federal laws related to labor and employment as well as tax standpoints represent a legal univers that is large, broad, and complicated. You’ll want to talk to your counsel about this specifically, ensuring that your lawyer understands the benefit plans that you have, and, to the extent that you offer a full suite of benefit plant, it’s incredibly important that you have a benefits lawyer help you think through these plans and represent them appropriately. Worth noting, too, is that the benefits you actually offer may be more capacious than you think they are. The law defines them as expansive enough to include all the perks and benefits you provide your employees, from tuition assistance to health club perks and beyond. Those all need to be included.
