Q: Corporate acquisitions - Is the acquirer bound to uphold hiring contracts established by the acquiree?
Oct 2022, as part of accepting a job with Company A, I signed a job offer that dictated annual salary of $128k and a bonus of 5-10% dependent on performance. May 2023, Company A was acquired by Company B. Oct 2023, annual review went very well, but I was informed by my direct manager that Company B has a different process for reviews that would be rolled out before end of year and I was asked to wait for that. Dec 2023, Company B reviews complete and annual compensation changes were unveiled, I am to receive what equates to a just under a 1.2% bonus. Upon bringing up the bonus terms in my hiring contract which was drafted and signed by Company A, I was told that it was discussed between the DOO and VPO and because company sales did so poorly (after the acquisition, record level sales in the 4 months leading up to) no one was going to be getting a bonus, but they made an exception and decided to, "at least give me something" and, "I should be happy I wasn't furloughed."
A: In a corporate acquisition, the acquirer typically conducts due dilligence to review the existing employment contracts of the acquiree. The approach depends on the type of acquisition. In an asset purchase, the acquirer can select which contracts to assume, including their terms. Conversely, in a stock purchase, the acquirer generally inherits all contracts, including employment agreements, as they are purchasing the entire entity. This is the standard practice unless there are specific state provisions that protect employees in the event of an operation's sale. It's imperative to thoroughly review the acquisition agreement's specific terms and consult with legal counsel to understand the obligations accurately.
Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.
The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.
Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.
