Conducting due diligence in connection with an acquisition involves, among other things, the identification of material risks. Historically, acquirers have not focused too heavily on employment practices as these risks have more often than not been considered either too individualized, esoteric and anecdotal, of too low value, or too remote. Times have changed. The rise of wage-hour collective and class action claims in the last dozen or so years has elevated risks posed by the methods companies use to pay their workers to a level where a serious review of a target's labor and employment practices, including pay practices, has become a requirement to avoid unknown risks. But in order to understand how to avoid these risks, the acquirer needs to know where to look first, and then protect itself in the definitive documentation.
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Previously published in Mergers & Acquisitions.
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