The business landscape never stays static for long. Not only do new companies form every month, but existing companies often merge or acquire other ones. Employees might find that they work for a new company overnight.
Unfortunately, employees could have their rights trampled during a merger or acquisition, so they need to be on guard. Below, our New Jersey employment lawyer looks at some of the key areas of conflict.
Discrimination in Layoffs & Other Employment Actions
Often, employees are laid off after a merger because there is significant overlap between the two companies. Any termination, however, could possibly be motivated by discrimination. The same is true of any negative employment action, such as reduction in pay or denial of promotion. The state’s Law Against Discrimination protects against many types of discrimination that might come into play during, on, or after a merger:
- The new company generally cannot consider any existing worker’s protected characteristics when taking any employment actions post-merger or acquisition, including but not limited to, layoffs, furloughs, demotions, promotions, reassignments, etc. These protected characteristics include race, creed, color, national origin, ancestry, age, marital status, civil union status, domestic partnership status, affectional or sexual orientation, genetic information, pregnancy or breastfeeding, sex, gender identity or expression, disability or atypical hereditary cellular or blood trait of any individual, nationality or military service.
- The new company cannot require existing employees to submit to a genetic test or make available the results of a genetic test.
- Pay discrimination. It is illegal for employers to pay workers of a protected class less than workers who are not in the protected class for substantially similar work, when viewed as a composite of skill, effort and responsibility. The new company will have to audit its pay practices to comport with this legal requirement after the merger or acquisition.
- Failure to accommodate disability discrimination. The new company should continue any prior reasonable accommodations granted to an existing worker or, at the very least, re-engage in the interactive process.
- Remember, the new company may come in with new anti-discrimination and anti-retaliation policies and procedures that do not align with the pre-merger or acquisition policies. Familiarize yourself with those policies so you are cognizant of how the new employer handles employee complaints and investigations.
As a common example, the newly formed business might lay off all employees over age 60 and offer superficial reasons. Affected employees should meet with an attorney to review their rights.
Fortunately, the right to be free of discrimination is created by law, not contract. This means a worker is protected regardless of how their new employer chooses to honor their employment contract.
Severance
If you are laid off, you might be entitled to severance. However, the newly-formed company might argue that the old company’s severance policy is null and void or, if you had an employment contract with the old employer, that your old contract is no longer in effect because of the merger. Consequently, a right to severance could be up in the air.
Contractual Agreements
If you are one of the few employees in New Jersey that has an employment contract, your contract probably has many agreements in it, such as:
- Non-compete clauses, which might limit an employee’s ability to work for a competitor after leaving employment.
- Non-solicitation clauses, preventing an employee from soliciting the company’s clients after leaving.
- Non-disclosure agreements, or NDAs, which limit what information an employee can use or disclose to another after leaving.
- Arbitration agreements that require resolution of disputes outside of court.
There is always a question as to whether these contractual agreements continue in full force after a merger. The counterparty might no longer exist after the merger, and the new company might have different terms or conditions they use in their contracts.
Policy Changes
Other company policies could change around discipline, employee reimbursement, telecommuting, and time off. Employees might have been relying on these policies, only to see them disappear after the merger. You may have an argument these policies created contractual rights that should continue through the merger.
FAQs About Employee Rights During Mergers & Acquisitions in New Jersey
Do employees keep their rights after a merger or acquisition in New Jersey?
Yes. Even when a company merges with or is acquired by another business, employees still have legal protections under New Jersey and federal law. Anti-discrimination laws, wage laws, and certain contractual rights continue to apply, even if the employer changes ownership or structure.
Can an employer lay off workers after a merger in New Jersey?
Employers may lay off workers after a merger or acquisition, especially if there are overlapping positions. However, layoffs cannot be based on protected characteristics such as age, race, gender, disability, or other traits protected under the New Jersey Law Against Discrimination. Employees who believe a layoff was discriminatory may have legal options.
What happens to employment contracts during a merger or acquisition?
Employment contracts may still apply after a merger, but the situation can become complicated. Agreements such as non-compete clauses, non-disclosure agreements, severance provisions, and arbitration clauses may or may not continue depending on the terms of the contract and the structure of the merger. Employees should review their agreements carefully if ownership changes.
Can company policies change after a merger or acquisition?
Yes. A new employer may change workplace policies related to discipline, pay, benefits, time off, or remote work after a merger or acquisition. However, some policies may create contractual rights, and changes that violate employment contracts, discrimination laws, or wage laws could be challenged.
Learn More About Employee Rights During Mergers in New Jersey
If your company is merging or being acquired, you should protect the rights that you have under law and may have under your employment contract. Often, companies use this opportunity to tear up employment contracts, depriving their employees of compensation and certain protections. Contact Sattiraju & Tharney, LLP today to discuss whether you have legal options.