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Retaining Employees After A Business Sale

Retaining Employees After A Business Sale in Florida

During the sale of a business, understandably, buyers often want to make sure that the employees are going to stay with the business. Although the seller can’t guarantee that the employees will stay (since employees aren’t assets), in our experience, employees generally want to stay if it’s in their best interest. Florida is an ‘at-will’ state, which means an employee can be fired at any time (for legal reasons only), and an employee can quit without giving any formal notice. While an employee isn’t guaranteed to transfer with a business asset sale, there are several things the new owner can do to ensure they keep the current employees. 

Ensure A Smooth Transition From Owner To Owner

As we understand it from our legal advisors, technically, the employees were hired by the former owner of the business or the former business entity, and in an asset sale situation, the new owner doesn’t have an obligation to keep any of the current employees, since all they have done is purchase the business assets. However, in most cases, it is part of what makes buying an existing business attractive to a buyer, and having trained employees working in the business from day one is a clear advantage. In many situations, these employees know much more about running the business than the new owner does, so ensuring that there is a smooth transition from one owner to the next is key. Buyer and seller would have agreed upon a handover or familiarization period in the sales contract, and that usually starts the day of or the day after closing. The best way to handle notifying the employees would be to gather everyone together, allow the previous owner to share with the employees that the business has been sold, and introduce the new owner. The new owner is then trained by the former owner on exactly how to run the business, and the employees will likely play major roles in that training. 

Employment Contracts With Key Employees

In business sales, confidentiality is of the utmost importance. That is why it is standard practice to not share with the employees that the business is for sale. If the employees find out that the business is for sale, they could jump ship before the business is even sold, and the business could definitely suffer from that. So, normally employees aren’t notified of a sale until AFTER it has happened. There are a few exceptions to this, and it usually involves managers or key employees. As mentioned above, buyers often want to “guarantee” that an employee will stay on after the sale. The only way to really do that is to let the key employee know that the business is for sale, and to have them enter into an employment contract/agreement (in writing) with the buyer before the sale happens. That gives the buyer some peace of mind when it comes to those key players, such as managers or license qualifiers. 

Honor Accrued Paid Time Off (PTO), Benefits, and Seniority

If you want to win favor with your new employees, addressing things like paid time off, benefits, and seniority that they accrued or enjoyed as part of their employment with the previous owner will likely be among their top concerns. Just put yourself in their shoes…would you want those things to be honored by the new owner? The answer is most likely yes. So, figure out a fair way to make sure that the employees will still get what was owed to them in terms of accrued PTO. Regarding seniority, I’m sure they would appreciate to keep it dating back to their original start date with the company. As far as benefits go, those will likely change somewhat, depending on the plans available to the new owner, but it would be a good idea to try and continue the same plan as the previous owner, whenever possible, at least to finish out the current year. Any changes you want to make to the business would be best introduced slowly or gradually. Too much change all at once could make employees nervous and want to find a new place to work. 

Create An Employee Incentive Program

After many business sales, new owners elect to offer a bonus to employees who stay on with the company. If you feel this is necessary, it wouldn’t be a bad thing to do. Of course, make sure to outline clear expectations for the bonus. Also, when you are meeting with each employee, find out what motivates them. Is it cash and prizes? Is it new challenges and opportunities within the company? Is it praise and recognition? Is it extra time off with their family? Each employee is a unique individual, and one incentive might not be appealing to another, so find out what would make them get excited. Take that knowledge and create an employee incentive program that will invigorate your employees and drive your business to the next level. 

Build Their Trust With Communication

Once employees have been told that the business has been sold and they now have a new boss, there will doubtless be some uncertainty and lots of questions. The best way for the new owner to deal with the situation is to communicate, communicate, and then communicate some more. The first thing everyone will want to know is if they still have a job. So, let them know what you are thinking and planning to do with the staff. If you are going to keep them on, make sure to tell them upfront that you would like for them to stay. That way, any fears of unemployment they might have are alleviated from the start. Make sure you give the employees as much information as possible. Set one-on-one meetings with each of the employees as soon as you can. You want to learn who they are, what their role is in the company, what concerns they might have, and the best way to successfully manage them. Showing them that you care about them will be the best way to begin these new relationships with your staff. 

As always, we encourage all buyers and sellers to consult their attorney to get the final legal word on dealing with employees. This is meant to be practical experience-based advice, and is in no way intended to be legal advice.