Sounds great, but what does it really mean for your business?
What happens when your relationship with long-service employees doesn’t turn out as planned and you realize that the potential costs to sever those employees could be substantial? You might consider calculating and negotiating those potential costs into the purchase price of a business for a discounted rate. If you do negotiate this as part of the purchase agreement, the current owner will pay all or part of those severance costs. Make sure a lawyer reviews that clause carefully.
If those negotiations aren’t successful, one thing that can be done is to put a proper employment contract into place – a contract that protects you. This contract has to delineate your severance obligations. Without a good contract, a 20-year employee, for example, could receive up to 24 months’ severance.
In any case, it is always a good idea to have an expert help put your contract together and to make sure that you are protected if a terminated employee makes additional claims on top of severance, such as bad faith and or discrimination.
Toronto Employment Lawyer, Daniel Lublin explains in further detail what steps you can take before buying a business in his latest article Buying a business? Protect yourself from high severance costs published in the Globe and Mail.