USA LAW AND PRACTICE Contributed by: George Casey, Heiko Schiwek, Elena Rubinov, Vinita Sithapathy, Kristina Trauger, Pierre-Emmanuel Perais, Clara Pang and Gregory Gewirtz, Linklaters
7.6 Labour Law Regulations Employee benefit and executive compensation issues can significantly impact M&A transactions. Federal, state and local laws may be applicable. Employment and Labour In the USA, employment agreements are typically “at will”. Buyers must carefully evaluate worker classifica- tion and ensure proper visa status. The proliferation of gig workers in the technology sector has heightened worker classification risks; misclassification of inde- pendent contractors can result in liability for unpaid wages, benefits and tax obligations under federal and state labour laws. Buyers should be mindful of the Worker Adjustment and Retraining Notification (WARN) Act and similar state statutes, which may enti- tle employees to advance notice of potential layoffs or plant closures, or salary in lieu of notice. Parties must assess: • whether key employees have resignation rights with full severance on a change in control; • whether the Code affects decisions on post-clos- ing employment arrangements (including employ- ment and retention agreements); and • whether key employees are subject to post- employment restrictive covenants. The enforceability of non-compete agreements varies across states; several jurisdictions ban such restric- tions entirely, though proprietary information and trade secret protections generally remain enforceable when properly drafted. Equity Plans and Award Agreements Buyers must review employee equity plans and the impact of a change of control on outstanding employ- ee equity, including legal compliance issues, legal and business limitations, and dilution of the acquirer’s shareholders. Non-Qualified Deferred Compensation Plans Key buyer considerations include: • whether the seller maintains non-qualified deferred compensation, and whether such arrangements comply with Section 409A of the Code; and
exempted. The agencies can take one of three cours- es of action when concluding their investigation: • they can let the applicable waiting period expire (if not terminated early, a possibility for no-issues deals), which allows the parties to close their trans- action within a year; • they can require parties to enter into consent agreements as a condition to clearance, including remedies requiring divestiture of businesses (eg, permanent, irrevocable licences) or behavioural commitments to undertake certain actions; or • they can seek to block the deal in a US federal court. The agencies also have the ability to review business transactions that are not subject to notification under the HSR Act, as well as business combinations that have already been consummated. Recent Developments in US Merger Control In 2022, the DOJ and FTC updated their joint Merger Guidelines to better address complexities in today’s markets, including the increasing importance of digi- tal markets. Thus far, the agencies under the current administration have kept these Merger Guidelines. Through the updated Merger Guidelines, the agencies seek to correct their perception of historical under- enforcement in merger control in the technology sec- tor. The result is an expansion of potential theories of harm and a shift of the burden to merging parties. These factors could result in more extended reviews for certain technology mergers and increased interest from the agencies towards a broader set of technol- ogy deals that have not traditionally been subject to scrutiny. New changes to the HSR filing form applicable to reportable transactions went into effect on 10 Febru- ary 2025, and significantly increase the burden of dis- closure requirements on filing parties, including more expansive document productions, narratives on mar- ket dynamics and information on the board member- ship of the acquiring person’s officers and directors.
331 CHAMBERS.COM
Powered by FlippingBook