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Why mergers and acquisitions may lead to employee lawsuits

On Behalf of | Oct 19, 2023 | Business Transactions |

The executives negotiating a business merger or acquisition usually look at the big picture for the organization. They want to achieve rapid expansion or to establish a larger market share, and a massive business transaction may be the best way to do so. 

Once one company acquires or merges with another, there may be many immediate challenges ahead for organizational leadership. Some of those challenges could lead to legal issues. The need to address staffing redundancies could ultimately result in the business facing a discrimination lawsuit brought by certain workers. 

Mass layoffs should be fair

Widespread terminations at a company are a natural byproduct of a merger or acquisition. While the company may seek to retain the services of certain workers, it will not need multiple people filling the same role. Therefore, the company will need to lay off or fire some of the redundant staff members. 

Best practices for this process include establishing clear standards for making decisions about who stays and who goes and having multiple layers of review to ensure that there aren’t any discriminatory trends in those decisions that could lead to allegations of discrimination. 

If too many of the workers let go share the same protected characteristics, then those workers might recognize the pattern and seek to fight back. If it seems like a company has let go of all the workers over the age of 40 or that members of a certain race have disproportionate representation among those let go, those terminated workers may claim that the company used the layoffs or terminations as a way of hiding discriminatory employment decisions. 

Recognizing where risk comes from during mergers and acquisitions may help executives and other professionals avoid mistakes that might lead to litigation.