Section 25 Issues Arising From the Purchase or Sale of a Business

• Library: Employer-Employee Law 2008

When a purchaser acquires the stock of an ongoing business, few issues arise because the employing entity has not changed. When the transaction is structured as an asset purchase and the employees are represented by a union, the purchaser may acquire a duty to bargain with the union.

While the general rule that a bona fide purchaser does not assume the terms of a contract applies unless there is specific agreement to the contrary, the union may have certain rights against the seller based on the contract. See John Wiley & Sons, Inc. v. Livingston,
376 U.S. 543 (1964). At a minimum, the seller will have a duty to bargain about the “effects” of the sale.

Two Supreme Court decisions are the critical starting point in this area of the law:

1. NLRB v. Burns Int’l Sec. Servs....