It is basic that any company making an acquisition should conduct due diligence concerning the target company’s business operations and potential liabilities, including human resources and labor and employment matters. The objective of this process is to ascertain whether there are material risks that could adversely affect the value of the transaction and, if so, whether the risks are such that the company should take mitigating measures to allow the transaction to go forward.

Historically, except for some limited exceptions (multi-employer pension plan withdrawal liability and the duty to assume a labor agreement being the most notable examples), labor and employment matters typically do not present a sufficient degree of risk or potential liability to fall into the “deal killer” category or to require implementing mitigation strategies, such as reductions in purchase price, escrow holdbacks, or shifting the cost of rep and warranty insurance. But things are changing, and there are a number of emerging labor and employment risks that have the potential to materially affect the value of a proposed transaction.

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