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Compliance Assistance Resources

elaws - employment laws assistance for workers and small businesses

- WARN Advisor

What Am I Responsible for if I Sell My Business?

In the case of the sale of part or all of your business, you are responsible for providing notice of any plant closing or mass layoff that takes place up to and including the time of the sale. The buyer is responsible for providing notice of any plant closing or mass layoff that takes place after the sale is completed.

When a business is sold, there is a technical termination of employment, even if your employees continue working at the same jobs for the new employer. WARN does not count that technical termination as an employment loss if your workers keep their jobs. Effectively, when a sale occurs, an employee of the seller company (excluding part-time employees) automatically becomes an employee of the buyer company for WARN purposes.

This also means that if there is an actual termination of employment (or a layoff of more than six months) for enough workers to require WARN notice, someone, either the seller or the buyer, is responsible for giving that notice. Who is responsible is determined by when the termination or layoff takes place. If the termination or layoff takes place before the sale is made, the seller is responsible to give notice; if the termination or layoff occurs after the sale is made, the buyer is responsible.

The new employee's job does not have to be the same job at the same wages and working conditions that the worker had with the previous employer, the seller. As long as the wages or working conditions are not so bad as to be considered a constructive discharge, changes in the job are not a reason for a worker to have suffered an employment loss. The definition of what constitutes a constructive discharge varies from state to state, but basically, it means a change in wages or working conditions that is so drastic and that is so onerous on the worker that the worker can reasonably consider him/herself to have been fired or forced to quit work.

However, some courts have held that an actual termination by the seller did not count as a WARN event when the workers were given the opportunity to apply for employment with the buyer and many of the workers were hired by the buyer. See International Union, Oil, Chemical & Atomic Workers, Local 7-517 v. The Uno-Ven Co., 170 F.3d 779 (7th Cir. 1999); Wiltz v. M/G Transport Services, Inc. 128 F.3d 957 (6th Cir.1997). For a contrary decision, see Phason v. Meridian Rail Corp. 479 F. 3d.527 (7th Cir. 2007).