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Key employment liabilities to consider in corporate transactions

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Claeys & Engels offers reassurance in the full range of human resources matters and fast, efficient and pragmatic legal advice.
When preparing for a corporate transaction, both sellers and buyers want to know potential significant employment liabilities so they can negotiate accordingly. This checklist summarises key employment law issues for buyers conducting M&A due diligence.


We conduct vendor or buyer due diligence exercises to ascertain these liabilities, with a view to the transaction itself and/or post-closing integration and harmonisation exercises.

Our lawyers from around the world have summarised some key employment issues buyers should focus on – in terms of cost and risk – in any M&A due diligence exercise.

Please note: this list is not intended to be exhaustive and regional and national differences will also need to be considered.

1. Compliance issues

Some employment obligations may lead to criminal or civil liabilities in case of non-compliance. They may include:

  • Registrations with the relevant tax and social security authorities, mandatory declarations and withholding of required social security and tax contributions
  • Non-compliance with minimum terms and conditions such as minimum wages, working time, annual holidays, etc.
  • Health & safety obligations
  • Discrimination
  • Right to work checks and non-compliance with immigration requirements
  • Compliance with staff representation rules and information and consultation obligations
  • Liability for service providers obligations
  • Privacy and data protection

2. Pay, pension and benefit schemes

Ensure that wages, premiums, cost allowances, holiday pay, overtime pay, and variable pay have been correctly paid. Check what bonuses, benefits, occupational pensions and equity award schemes are in place, whether these schemes transfer and whether they can be easily changed. In particular occupational pension schemes may give rise to important financial liabilities in the event of underfunding or non-affiliation of certain employees.

3. Employment contracts, service agreements and policies

Review employment contracts, service agreements and policies to check whether they are appropriate and whether terms and conditions can be easily changed. Pay special attention to employment contracts or service agreements of key individuals and whether they include non-compete obligations, retention payments or enhanced severance payments in the event of dismissal or change of control. These may result in significant payments.

4. Periods of continuous employment and enhanced redundancy schemes

Periods of continued employment often have an impact on the calculation of notice periods and severance indemnities. High levels of seniority and/or enhanced redundancy schemes could prove costly on any subsequent restructuring.

5. Atypical workers

Working with employees of third parties such as temporary agency workers, employee leasing and subcontracting may be heavily regulated giving rise to civil and criminal liabilities in the event of non-compliance. The same applies to ‘fake’ self-employment of contractors or commercial agents that may result in employment rights, social security and tax claims. Review existing terms of engagement and the underlying facts to establish the true employment status.

6. Collective bargaining agreements (CBAs)

Check what company CBAs are in place, their terms and conditions or additional obligations and under what conditions they can be terminated.

7. Collective issues (unions and staff representative bodies)

Ensure that the required staff representative bodies (such as the Works Council, Health & Safety Committee, etc.) are in place and that the seller complied with its information and consultation obligations and/or negotiation obligations. Members are usually heavily protected against dismissal.

8. Litigation

Obtain information from the seller regarding all employment-related threatened or pending complaints or labour disputes, legal actions, investigations, settlement agreements and judgements or rulings against the company.

For more information about employment law

Sophie Maes
Partner - Belgium
Claeys & Engels