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Firing after Merger and Acquisition violates Wrongful Termination Laws?

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  • Firing after Merger and Acquisition violates Wrongful Termination Laws?

    When company A acquires company B and fires B's employees because of duplicated positions, does this firing violates Wrongful Termination Laws?

    Thanks!

  • #2
    No, not at all.
    The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

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    • #3
      Originally posted by cbg View Post
      No, not at all.
      Thanks for the reply. If in a merger, the acquirer is headquartered in a state (A) with Wrongful Discharge law, and the target's state (B) doesn't have the law. After the merger, if the target company stays in the same state, are employees of the target company protected by the Wrongful Discharge law in A's state? Or they still aren't protected by the Wrongful Discharge law since their offices are still in state B?

      Thanks for the help!

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      • #4
        Wrongful termination/discharge has a very specific legal meaning and losing your position because the new company is now overstaffed does not fall under it, no matter what state the employer is based in. Did you have a specific contract that promised a certain term of employment? If so, that contract should state what happens if the employer wants to terminate your employment.

        What part of wrongful termination do you feel your termination falls under? It is very very common for employees to lose their positions when a merger occurs, especially if they share the same position as someone in the other company. Many times the buying/acquiring company keeps most of their own because they are known vs unknown.

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        • #5
          Originally posted by hr for me View Post
          Wrongful termination/discharge has a very specific legal meaning and losing your position because the new company is now overstaffed does not fall under it, no matter what state the employer is based in. Did you have a specific contract that promised a certain term of employment? If so, that contract should state what happens if the employer wants to terminate your employment.

          What part of wrongful termination do you feel your termination falls under? It is very very common for employees to lose their positions when a merger occurs, especially if they share the same position as someone in the other company. Many times the buying/acquiring company keeps most of their own because they are known vs unknown.
          Thanks for the detailed reply. I am a Ph.D. student and I am curious about whether the Wrongful Discharge law affects the cross-state acquisition activities. My hypothesis is that the law makes firing difficult and thus would discourage acquisition activities. Especially for a firm in a state without WDL to acquire a firm in a state with the law. My empirical results support my hypothesis so I am here to seek some verification.

          My guess is that WDL still plays a role here, not at the initial mass layoff, but at the later firing process?

          Thanks again! Any thoughts would be greatly appreciated.

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          • #6
            A wrongful termination/discharge can happen in any state. You cannot be terminated due to a reason prohibited by law (illegal reason) such as religion, race, gender .......

            What specific wrongful termination/discharge law are you referring to that applies in some states but not others?
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            • #7
              In order to qualify as a wrongful termination, there must be a specific law in the state where the employee lives and works that would otherwise expressly prohibit the termination. In no state in the US is there a law that prohibits an employer from terming staff during a merger because of duplicate positions. Therefore, nowhere in the US is this going to be a wrongful termination.

              The list of prohibited reasons is very short. I've been through quite a few mergers/acquisitions, on both sides of the desk, and have yet to see anything that was even in the same state, let alone the same ballpark, as a wrongful term. I think you may need to adjust your thesis a bit.

              Are you quite sure you understand exactly what a wrongful term is?
              The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

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              • #8
                All 50 states have wrongful termination laws.

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                • #9
                  Originally posted by cbg View Post
                  In order to qualify as a wrongful termination, there must be a specific law in the state where the employee lives and works that would otherwise expressly prohibit the termination. In no state in the US is there a law that prohibits an employer from terming staff during a merger because of duplicate positions. Therefore, nowhere in the US is this going to be a wrongful termination.

                  The list of prohibited reasons is very short. I've been through quite a few mergers/acquisitions, on both sides of the desk, and have yet to see anything that was even in the same state, let alone the same ballpark, as a wrongful term. I think you may need to adjust your thesis a bit.

                  Are you quite sure you understand exactly what a wrongful term is?
                  Thank you all for the reply! My paper plans to explore the stagger adoption of the Wrongful Discharge law, and therefore I have some variations in the sample where some states have the law and some don't.

                  Now I understand more of the law from this forum, I think the mass layoff during the merger is definitely not protected by the law. But maybe Wrongful discharge still plays a role in the merger? Assume I have two merger targets, one in the state with WDL and the other in the state without the law. All other things equal, am I more likely to acquire the firm in the state without the law, just to ease the problem with firing employees in the future?

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                  • #10
                    One more time - there are no states anywhere in the USA that do not have anti-wrongful termination laws. None, nein, nada. This includes your mystery state B.

                    Being laid off because of a merger is perfectly legal in all 50 states.

                    Hope it finally sinks in now.

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                    • #11
                      Your premise is flawed, because as eerelations says, there is no state anywhere in the US that does not have SOME wrongful discharge laws. There are also Federal laws that apply in all 50 states.

                      However, I think we'll get further with this if you'll answer a question for me: What do you think is meant by a wrongful discharge? What are some of the reasons you believe a discharge would be considered wrongful, and how do they relate to a merger?
                      The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

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                      • #12
                        The only possible protection I can see in this case is if some of the employees had contracts and/or collective bargaining agreements with the original employer. Now that might stall an acquisition if the minutiae of the details get in the way, especially if the purchasing company is not unionized or doesn't have any actual contracts with employees (usually more at a high level executive position). And it may take more to terminate those protected individuals than someone with a contract or non-unionized. That might make the acquiring company think twice (or might not). But it's not really going to be state laws that protect them, except possibly a "right to work" state vs a non-right to work state.

                        I do think you thesis is highly flawed and I am not sure it can be validated except in very very limited circumstances (and I've had close to 20 years of HR experience and others posting on this thread have much more than me).
                        Last edited by hr for me; 03-27-2016, 02:09 PM.

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                        • #13
                          And even right-to-work vs. non-right-to-work is going to have very little impact unless the union CBA expressly protects jobs in the event of the merger.
                          The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

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                          • #14
                            agree with you cbg...... I do think it would be rare that unions would have that much control.

                            Another issue I thought of based on your wording of control that could pop-up ( and again has nothing to do with wrongful termination) is "change in control" clauses for non-qualified executive benefit plans and some compensation plans. Things that the company would have to fund at acquisition that could be a huge liability.

                            I can find some barriers to acquision, but am having a hard time coming up with ones that relate back to wrongful termination laws at all. Trying to pull one or two needles out of a very very large haystack. Hence why I find the original thesis so flawed.

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                            • #15
                              What everyone else has said is correct. Your thesis is flawed on its face and you need to go back to the drawing board. Every state has some unlawful discharge protections, but in no state anywhere do they have anything to do with layoffs due to overstaffing or lack of work. Unlawful discharges cover situations like discrimination on the basis of a protected characteristic such as race, gender, religion, etc. and sexual harassment. There is no law in any state that prohibits employers from conducting layoffs for non-discriminatory reasons. A merger doesn't change those facts.

                              One way you can possibly alter your thesis-most states tend to be "employer friendly" or "employee friendly." California is easily the most employee friendly state in the nation; either Texas or Florida would probably be the most employer friendly. Businesses in states that lean employee friendly probably are less attractive in mergers and acquisitions. By broadening your scope, you might be able to do something with your thesis. But what you have right now is disprovable on it's face, without even conducting any research, and would earn you an F were I your professor.

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