What Happens to My Wages and Benefits When a New Business Takes Over for My Old Employer?

It’s understandable for employees to feel unsettled and anxious when their employer sells the business to another employer. They can feel scared of losing their jobs and about what will happen to their wages and benefits once the new owner enters the picture.

As a company purchasing another company, it is important to ensure you follow all necessary rules and regulations regarding existing employee wages.

Will Benefits and Wages Change?

When a business owner sells their business, any employment attached to the business is also technically terminated. This applies even if an employee continues to work the same job for their new employer. When this happens, the seller employer’s employees technically become the buyer employer’s employees.

The new employer may assign an old employee to a different position with different duties, wages, and working conditions than the employee had when working for the former employer. This means that unless there is a legally binding contract saying otherwise, a new employer may change an employee’s wages and benefits. The new employer may also implement new time-off policies, adjusted pay, different bonuses, and different work schedules, among others.

Aside from the changes in ownership, operations, and leadership, it is also common for employee benefits to change after a takeover. Maintaining two separate retirement and healthcare plan structures is simply a poor business decision, so the new employer will need to choose. In such cases, employees will typically need to change their retirement and healthcare plans to match the new employer’s structure.

When it comes to current retirement plans, however, employees have certain protections under the Employee Retirement Income Security Act (ERISA). It is the responsibility of the new employer to comply with ERISA and ensure that all employees agree with the changes to retirement plans.

What If an Employee is Terminated?

Unfortunately, for some employees, a takeover or acquisition means that there’s a chance that they will be terminated. The employee will still need to receive all final wages and benefit payouts as required by law. Employers can decide whether to offer severance packages and whether they want employees to sign non-disclosure agreements (NDAs) or noncompetes.

If a company is presenting these agreements to terminated employees, they should always be drafted or reviewed by an employment attorney. Many of these agreements are unenforceable in California, and companies should make sure any agreements signed are valid and airtight.

Reach Out to Our Experienced Encino Employment Lawyer Today

As an employer buying or selling a business, always make sure you comply with all regulations, whether you are retaining employees or terminating them. Many employment disputes can arise following the sale or acquisition of a company. If you want more information or need legal advice, please do not hesitate to reach out to the law office of Kaufman McAndrew LLP. You can set up your consultation with our Encino employment lawyer by calling 818-788-5767 or filling out our online form.