Potential Negative Impact to the Sale of Your Business - Article #3

Article #3. Employment Agreements

You decided to sell your business.?You have accepted an offer. The buyer has begun due diligence and it is moving along nicely. You have just about completed the negotiation on the Purchase Agreement when the buyer requests copies of your employment agreements with each of your staff members.?You explain that you do not have employment agreements as your business is located within a right-to-work state and you “really don’t believe any of your employees would ever attempt to “poach” accounts…”

The buyer suggests they will require a non-solicit/non-compete signed by each of the employees, including you, prior to closing.?You do not mind signing an agreement as you are retiring and do not plan to climb into one more attic, but you are not planning to disclose the sale of the business to any of the employees until the funds from the closing have hit your account. ?

You may be at an impasse…but what are your options if you want to keep a sale moving forward?

Here are a couple of things to consider; if you are close to a sale and you don’t have employment agreements which include assignment provisions, you might want/need to negotiate new agreements with your employees right away while providing adequate consideration to them for entering into the agreements.?Or you may agree with the buyer on a specific date in which you will notify your employees of your plans for the sale. This should fall on a date very close to the closing when the purchase agreement has been fully negotiated and a closing date on the calendar.?Make the appropriate introductions and explain that the buyer would like to offer employment to each of the staff members, contingent upon an employment agreement. Again, with consideration to them for entering into the agreements.

Whether you are selling your business right away or in the future, having an employment agreement, generated solely through the advice of an attorney, with each of your employees is a good idea.?It should outline your expectations and be very clear on non-compete/non-solicit language and should include assignment language to a new owner.

For more information, contact me. [email protected] ~561-308-5199