Littler Employment Content - Labor and Employment Due Diligence Prior to Merger, Acquisition or Asset Transfer

Buyer’s Due Diligence Checklist

The following is a list of the subjects necessary for investigation to complete a labor and employment due diligence. Specifics are included under each subject heading.

1. Litigation, Potential Litigation and Administrative Proceedings (last five years).

a. EEOC, state agency, or local agency lawsuits and judgments entered or settlement agreements reached within the last five years or longer if continuing obligations remain.

b. Charges of discrimination filed with the EEOC, state agencies or local agencies.

c. Compliance agreements, letters of commitment, settlement agreements, consent decrees, and conciliation agreements with any government agency.

d. Unfair labor practice charges and judgments entered or settlement agreements reached within the last five years or longer if continuing obligations remain.

e. Any other employment litigation and judgments entered or settlement agreements reached within the last five years or longer if continuing obligations remain.

f. Correspondence and audits from the Office of Federal Contract Compliance Programs (OFCCP), the Wage and Hour Division of Department of Labor relating to FLSA, or the Department of Labor relating to Service Contract Acts.

g. OSHA citations, litigation files, logs, training records, documents demonstrating compliance with right-to-know laws (state and federal) and all other safety related records.

h. Workers’ compensation claims, lawsuits and on-the-job injury history.

i. Demand letters, letters of complaint from employees and any other documents threatening litigation.

j. Outside counsel fees relevant to the foregoing.

2. Collective Bargaining Agreements and Related Contract Maintenance.

a. Current collective bargaining agreements.

b. Grievances pending and grievance settlements with current application.

c. Arbitration decisions with current impact and all arbitration decisions for the last five years.

d. Recent organizing attempts and results.

e. Documents relating to past strikes (ten-year history).

3. Employment Policies and Documentation (last five years).

a. Human resources policies specifically including drug and alcohol, harassment, and FMLA and other leave policies.

b. Employee handbooks.

c. Affirmative action plans, EEO-1 reports, current status reports and audit reports.

d. Job descriptions and other documents describing qualifications for the job, and tests administered in employment situations including validation studies.

e. Application forms, job evaluation forms, warning and disciplinary forms.

f. Termination notices.

g. Employee loans or other financial transactions between employees and the company.

h. Census data on current employees and anyone with recall rights. Information should include: name, Social Security number, hire date, birth date, sex, race, national origin, marital status, position, pay rate and other pertinent data available.

i. Lists of employees on sick leave and short- or long-term disability, military leave and any other leave of absence.

j. Contracts with employees including employment contracts, trade secret agreements, covenants-not-to-compete and golden parachute agreements.

k. Independent contractor and consultant agreements.

l. Internal audits of employment practices and compliance with employment laws.

m. Employee attendance summaries/studies.

n. I-9 forms and other immigration-related files.

o. ERISA benefit plan documents, summary plan descriptions, IRS Form 5500 for each plan, most recent determination letter for tax-qualified plans, most recent auditor’s report for plans that hold assets in trust, vendor contracts, estimated IBNR (incurred but not reported) liabilities for any self-insured plans, and all other benefit obligations to employees whether or not governed by ERISA such as severance agreements and change-of-control agreements.

4. Human Resources Organization.

a. Management structure of human resources department.

b. Structure relating specifically to plants or facilities to be acquired.

c. Likelihood that relevant individuals will remain after acquisition.

d. Overall evaluation of labor climate.

e. Basic industrial relations philosophy.

f. How labor negotiations are conducted (headquarters vis-a-vis local management) and the date and nature of any negotiations currently planned.

The preceding checklist is excerpted from The National Employer — 2011-12 Edition (copyright 2011 Littler Mendelson, P.C.)

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