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Labor Considerations in M&A Transactions

Cascade Conversations

This episode of Cascade Conversations discusses how labor regulations and labor union agreements affect all aspects of financial transactions. Check out Cascade Partners Managing Director Ron Reed, and Foster Swift Collins & Smith PC Attorney Michael Blum, as they review stock sales and asset sales regarding labor regulations, the obligations and risks of assuming labor agreements, as well as how they affect due diligence, terms sheets, private equity, and benefit plans. Michael has devoted his impressive career to Labor Law and its implications for employers; Ron brings his decades of financial and business operations experience to this lively and informative conversation.

Video Transcript

00:00:00:11 – 00:00:15:12
Announcer
Welcome to Cascade Conversations. Join the team at Cascade Partners and their network of trusted advisers as they work to demystify details terminology and strategies in the world of acquisitions, divestitures and financings.

00:00:17:05 – 00:00:31:28
Ron Reed: CEO, Managing Director – Cascade Partners
Michael, I want to thank you and Cliff again for making the time for our team today and giving a great hour-long lunch and learn with our team. And also, the most recent transaction you and I worked in together was really a great experience and I am looking forward to working with you again.

00:00:32:13 – 00:00:44:22
Michael Blum: Attorney – Foster Swift Collins & Smith PC
Oh, good. Yeah. Thank you so much. You know, we really appreciated the opportunity to come out and speak with your team and go through some of the labor and employment issues and transactions. So yeah, thank you for the opportunity.

00:00:44:29 – 00:00:50:14
Ron Reed: CEO, Managing Director – Cascade Partners
Well, today I’m pleased to present on our Cascade conversation Mike Bloom, who works for Foster Swift. He’s the chair of their labor relations group from the Labor.

00:00:57:01 – 00:00:57:27
Michael Blum: Attorney – Foster Swift Collins & Smith PC
Labor Employment Group.

00:00:57:27 – 00:01:20:16
Ron Reed: CEO, Managing Director – Cascade Partners
Labor employer group and would like to kind of go through some of the topics related to labor and specifically labor unions as they relate to sale and buy side transactions. And today, I think you really made it clear that there’s a material difference between the labor relations issues in a stock sale and in an asset purchase. And maybe you could just touch on those.

00:01:20:26 – 00:01:51:21
Michael Blum: Attorney – Foster Swift Collins & Smith PC
Sure. There is, you know, to look at it from the more simplistic way, there’s two types of transactions they get a little more complicated. But basically you have either a stock sale or you have an asset sale. And with the stock sale, the ownership of the corporate entity changes, but the ownership doesn’t change the obligations as the employer.

00:01:52:03 – 00:02:20:26
Michael Blum: Attorney – Foster Swift Collins & Smith PC
So if I could use by way of example, if you bought into General Motors, that doesn’t make you an employer of the GM employees. You’re you own a piece of the business. That’s sort of what a stock sale has. You’re an owner not necessarily the employer, where in an asset sale, the buyer purchases the assets, not just ownership of the business.

00:02:21:10 – 00:02:59:27
Michael Blum: Attorney – Foster Swift Collins & Smith PC
So the basic rule is that on a stock transaction, the from an employment standpoint, from a labor and employment standpoint, the buyer steps into the shoes of the seller as the employer and all of the responsibilities and liabilities of the buyer get transferred to the seller, get transferred over to the buyer in an asset sale. Depending on exactly how it’s structured, there’s much more opportunity to negotiate between the buyer and the seller as to what is actually being purchased.

00:03:00:15 – 00:03:21:11
Michael Blum: Attorney – Foster Swift Collins & Smith PC
And that’s both on what assets are going to be purchased, what liabilities are going to be assumed by either the buyer or the seller. And there’s much more opportunity on an asset sale from a labor and employment standpoint for the parties to structure the deal that they’re comfortable with.

00:03:21:18 – 00:03:49:07
Ron Reed: CEO, Managing Director – Cascade Partners
And I think it’s important to note as as you say that whether it’s a whether there’s a labor union involved or not, there are still in an asset purchase. There’s a new entity that will be the employer of the employees and has to hire them anew the day the transaction transacts. So on the first day of the new ownership, whether there’s a labor union involved, the new entity will hire the employees as it sees fit.

00:03:49:19 – 00:04:22:03
Ron Reed: CEO, Managing Director – Cascade Partners
So I think that’s that’s a nuance, but I think that’s important. The nuances of a labor union are materially different. Because the contract you’re buying isn’t you’re not just offering employees new employment. There’s now collective bargaining agreement or CBA for short that we’re now have to address as well. So maybe we could go into that because I think you and I at our most recent transaction had to address this because it’s important to know going into an asset purchase the buyer’s intentions around the CBA.

00:04:22:15 – 00:04:23:13
Ron Reed: CEO, Managing Director – Cascade Partners
Maybe you could talk a little bit.

00:04:23:15 – 00:05:01:11
Michael Blum: Attorney – Foster Swift Collins & Smith PC
Oh, sure. And you’re absolutely right. I mean, if you could have a nonunion employer or employees so there’s no union representing the employees of the seller, and then you have basically at will employment, so you can offer employment on whatever terms the buyer chooses. Now, keep in mind that there are statutes in place. So if there’s violations of statutes you’re still going to have some successor liability issues even in a nonunion setting.

00:05:01:11 – 00:05:59:27
Michael Blum: Attorney – Foster Swift Collins & Smith PC
But that’s just by statute. Well, we’re talking here is that when the seller is a union company, that means that there is a bargaining unit of employee employed by the seller that are represented by a labor organization. And that’s where some of the complications and nuances that we dealt with come in. And there’s two issues in any transaction when a union company is being purchased, and one is does the new employer, the buyer, have an obligation to shift, to recognize that union as the exclusive bargaining representative of the employees and the second issue is if the answer to that is yes.

00:06:00:10 – 00:06:26:28
Michael Blum: Attorney – Foster Swift Collins & Smith PC
Does the collective bargaining agreement that was in place and negotiated by the seller and the union covering the bargaining unit employees get transferred over and become a contract that the buyer needs to comply with? So you have both the union recognition issues and the obligation to accept the collective bargaining agreement.

00:06:27:10 – 00:06:53:05
Ron Reed: CEO, Managing Director – Cascade Partners
Right. And I’d say from the negotiator standpoint and the issue for our firm and where we have to differentiate ourselves is we can in the due diligence process when we’re selling a company working with the Labor Council like yourself, as we did in the last transaction, make sure that we understand very clearly upfront the intent of the buyer, especially because there are obligations the buyer has.

00:06:53:05 – 00:07:14:10
Ron Reed: CEO, Managing Director – Cascade Partners
So if they are going to assume the union, as they did in the last transaction you’re in, we need to understand, are those are they going to change their CBA? So some of the things we need to provide the buyer right up front are the terms, you know, how long is the collective bargaining agreement, when does it renew and when do we have to renegotiate those terms?

00:07:15:12 – 00:07:37:28
Ron Reed: CEO, Managing Director – Cascade Partners
If the buyer’s going to accept those terms as is fantastic, if they are not and they want to renegotiate, which is their privilege and under the law, if they’re going to require they as a condition of close that the union accept their new terms, that throws risk into the actual close. And we’ve dealt with that recently.

00:07:38:05 – 00:08:05:19
Michael Blum: Attorney – Foster Swift Collins & Smith PC
Yes, we have. Yeah, that’s so let’s separate the two issues one and the recognition of the union. The question becomes who are as employees is the buyer going to offer employment to is it going to be everybody? Is it going to be some people? It can’t be for an illegal reason. We don’t want somebody because they’re represented by a union.

00:08:05:19 – 00:08:45:27
Michael Blum: Attorney – Foster Swift Collins & Smith PC
That’d be illegal. I can’t do that. But but the needs of the new employer might be different. So you look at the seller as a bargaining unit of employees, the buyer is going to have a new group of employees there might be overlap, they might be the same, they might be different. But the general rule by Supreme Court decision is that if the new employer, the buyer, the new employer has in its workforce, a majority of those employees will recognize their represented by the union.

00:08:47:13 – 00:09:07:04
Michael Blum: Attorney – Foster Swift Collins & Smith PC
A when the seller was the employer then the buyer is going to have an obligation to offer to negotiate with the union. Right. OK, so that is a bargaining obligation it’s the majority principle that is the American labor law is based.

00:09:07:04 – 00:09:22:12
Ron Reed: CEO, Managing Director – Cascade Partners
On, which is what governed the transaction you and I were just talking about. It’s the the buyer absolutely wanted the entire employee base. Right. So therefore, we knew going in that the assumption was that was going to be a majority. Right. And so there was clearly a but now the second.

00:09:22:12 – 00:09:53:21
Michael Blum: Attorney – Foster Swift Collins & Smith PC
Issue, the second issue, this is where the complications come in and the term that is used in labor law is perfectly clear doctrine and under the perfectly clear doctrine that determines whether the new employer, the buyer, not only has to recognize and negotiate with the union, but whether they also have to accept the collective bargaining agreement that was in place prior to the transaction closing.

00:09:54:13 – 00:10:25:16
Michael Blum: Attorney – Foster Swift Collins & Smith PC
And the general principle is that if the buyer makes it perfectly clear that they are going to be the new employer and they’re going to offer initial terms and conditions of employment that fit with what they are willing to provide, then they do not they need to adopt the collective bargaining agreement because they’re making it clear they’re the new employer.

00:10:25:16 – 00:11:07:07
Michael Blum: Attorney – Foster Swift Collins & Smith PC
They’re going to set the initial terms and conditions of employment and the employees are free to accept those terms or not. Until that moment comes, you’re not going to know exactly how many employees are actually going to go with the buyer. So that’s how that perfectly clear doctrine works. But the opposite side of that coin is if the buyer makes it clear that they’re not going to make any changes, that they want all of the employees and they’re going to accept all of their employees and offer employment, and nothing’s going to change, then by law, they may have to accept the contract.

00:11:07:14 – 00:11:33:09
Ron Reed: CEO, Managing Director – Cascade Partners
Right? So there I think the governing principle here, especially in the transaction, let’s say over again, we’re going to move down the asset purchase. So what you and I are talking about is an asset purchase, correct? There’s that in an asset purchase when you’re going to, if you will, dissolve the prior employment and going to renew employment. There’s also some notice periods, maybe you can talk about those and then we have to address the risk.

00:11:33:09 – 00:12:01:11
Ron Reed: CEO, Managing Director – Cascade Partners
So again, the new employer has the right to change the collective bargaining agreement. With that right, of course, comes risk. You know, naturally, if the terms are not seen as complimentary or if the labor force is not satisfied with those firms or they’re not favorable, then naturally the new buyer and possibly the seller is at risk for some turbulence in their workforce.

00:12:01:11 – 00:12:03:21
Ron Reed: CEO, Managing Director – Cascade Partners
Maybe we talk about the notice periods and that turbulence.

00:12:03:28 – 00:12:48:08
Michael Blum: Attorney – Foster Swift Collins & Smith PC
Right. Well, with respect to the duty to give notice to the union, there’s two different types of notices. And keep in mind that you have to separate entities, the seller employer and the new employer as the buyer. And so with the seller on an asset sale there, that employer entity is being dissolved. And so the question becomes they are what obligation do they have to discuss with the union this transaction?

00:12:49:04 – 00:13:21:22
Michael Blum: Attorney – Foster Swift Collins & Smith PC
And that is what’s called affects bargaining. And what that means is that as the seller, the employer has an obligation to let the union know that there’s a transaction in the works and offer to bargain with the union. The affect that that transaction will have and the employees that it represents. Right. So that’s different from the obligation to negotiate with the union over whether the transaction is going to happen.

00:13:21:29 – 00:13:48:11
Michael Blum: Attorney – Foster Swift Collins & Smith PC
That’s not required, but the affects of that transaction is required under federal labor law. And so that is from the seller side. From the buyer’s side, they’re going to assuming on an asset sale. They want to set the initial terms and they hire a majority of the employees. Then the union says, we want to represent the employees and we want to bargain.

00:13:48:27 – 00:14:18:20
Michael Blum: Attorney – Foster Swift Collins & Smith PC
So the new employer would have an obligation to recognize the union and negotiate with the union. Any changes in the wages and benefits were set initially. So once those terms and conditions of employment are set by the new employer, that becomes what must mean be in place until such time as changes to it or negotiated with the union.

00:14:19:06 – 00:14:50:00
Michael Blum: Attorney – Foster Swift Collins & Smith PC
And so that so the end. Right. I think backing up to when do these notices have to be given the with any bargaining obligation, the question becomes what’s reasonable? Because if you tell the union at 11:59 p.m. that a transaction is happening in one minute, are they going to have an opportunity to be effective in any discussions? The answer is that.

00:14:50:00 – 00:15:19:07
Michael Blum: Attorney – Foster Swift Collins & Smith PC
I mean, obviously that’s an extreme example to make the point. You have to give enough advance notice so that the union has a meaningful opportunity to discuss the effects on the employees. And there’s no hard and fast rule and that there is some case law that says if you don’t give any the minimum amount of backpay you’re going to owe is two weeks.

00:15:19:22 – 00:15:38:10
Michael Blum: Attorney – Foster Swift Collins & Smith PC
It’s a case called Trans Marine. And we talked about that, you know, so that is something that there’s going to be a penalty for not doing it. How much notice actually has to be given? It’s what’s reasonable under the circumstances. But at a minimum, I recommend that it’s at least two weeks.

00:15:38:17 – 00:16:03:26
Ron Reed: CEO, Managing Director – Cascade Partners
And I think you and I address the subjective nature of that notice in the event that we believe that there will be either moderate to favorable changes from the new employer as we dealt with and what are favorable and unfavorable is in the eye of the beholder, of course. Right. But, you know, if on a subjective basis, you know, we we looked at that.

00:16:03:26 – 00:16:21:19
Ron Reed: CEO, Managing Director – Cascade Partners
I recall us looking at that and we gave them ample notice. And as it turned out, not only did we give them notice and I think it’s it’s instructive to kind of walk through the process here from the beginning. Of our process all the way to the close and I think could be kind of sums up everything we’ve just talked about.

00:16:21:19 – 00:16:46:12
Ron Reed: CEO, Managing Director – Cascade Partners
So when we work together on a transaction where we’re going to go to market, one of the valuable things we can do together, and I think you really reinforced this in our talk today, due diligence when we’re going to market as either a buyer or seller. There is a handful of due diligence items are labor related to labor unions that are really important to get on the table whether you’re the buyer or the seller.

00:16:46:12 – 00:17:12:27
Ron Reed: CEO, Managing Director – Cascade Partners
And I’ll say the reason for the seller and I’ll take the seller side here for a moment because I think it’s very important to get the price that you want and make sure you’ve got certainty of close. So maybe you can talk a little bit with the due diligence, but we can talk. The top topic for me is if there’s a CBA getting that on the table for the potential buyers quite soon with the terms and the timing is critical.

00:17:13:07 – 00:17:18:09
Ron Reed: CEO, Managing Director – Cascade Partners
You’ve got a couple of other items with that, but what are the other things in due diligence we really need to get on the table.

00:17:18:13 – 00:18:03:09
Michael Blum: Attorney – Foster Swift Collins & Smith PC
Well, in your due diligence, you know, every transaction you’re going to use checklists. Sure. And the checklists, they’re going to ask for all of the relevant documents. So you’re going to have the employment documents, which are kind of pretty much standard, you know, either employment agreements, either policies or the handbook showing that from the labor standpoint, where I sometimes see holes in the due diligence is, you know, is there a collective bargaining agreement if there’s a collective bargaining agreement, you’d better make sure that somebody is tasked with reading it because it’s going to have a number of provisions and a one.

00:18:03:10 – 00:18:28:12
Michael Blum: Attorney – Foster Swift Collins & Smith PC
When does that expire? And the expiration date determines when, you know, is there going to be an automatic renewal clause in it. So you have to know, is that going to expire? Is that going to automatically renew? When is the end date on that collective bargaining agreement? There may also be in that collective bargaining agreement, a successor clause, and that is critical.

00:18:28:22 – 00:18:58:09
Michael Blum: Attorney – Foster Swift Collins & Smith PC
Successor clauses are challenged in the courts frequently some are enforceable, some are not, depending on how they’re worded and you know what they’re requiring. But there may be obligations on the seller and the buyer with respect to a transaction that’s inside the collective bargaining agreement. You need to know that. Right. And the other thing, a big issue is pensions and collective bargaining agreements are going to have a provision for retirement.

00:18:58:10 – 00:19:33:13
Michael Blum: Attorney – Foster Swift Collins & Smith PC
Most of them do. It could be a DC plan. It could be a DB plan. And if it’s a defined benefit plan, then the question is going to be become is this for a multi employer group or is this a standalone DB plan? And if it’s a multi employer group, what they call Taft-Hartley, plan, that gets a little bit complicated because that potentially could open up issues of withdrawal, liability and various things under the pension reform.

00:19:34:04 – 00:19:54:21
Michael Blum: Attorney – Foster Swift Collins & Smith PC
And so those are some things that you’re not going to see in side the collective bargaining agreement yeah. But if you see DB plan in a collective bargaining agreement, that should trigger a request for the participation plan in the retirement.

00:19:54:29 – 00:20:21:03
Ron Reed: CEO, Managing Director – Cascade Partners
And I’d say this is kind of our standard procedure here, especially in the sell side, is to make sure we have all those documents readily available. And then I’d say the reason especially they’re important in the sell side is in the event we find ourselves in an asset purchase or an asset sale, and we are evaluating term sheets, as we discussed earlier, not all term sheets are just about the amount of money.

00:20:21:19 – 00:20:21:26
Michael Blum: Attorney – Foster Swift Collins & Smith PC
Right.

00:20:22:04 – 00:20:43:04
Ron Reed: CEO, Managing Director – Cascade Partners
So in the bill, the particular thing we’re assessing when it comes to labor unions, you could have a term sheet for $100 million on one hand and the term sheet for $98 million in the other hand. The $100 million term sheet says, by the way, we are going to change, we’re going to take this opportunity to change the terms of the collective bargaining agreement.

00:20:43:04 – 00:21:22:23
Ron Reed: CEO, Managing Director – Cascade Partners
We naturally understand we want the employees, then you want in. And additionally we’re going to make that a condition of close. We don’t want to buy this company unless your union accepts our terms. That’s a very different term sheet than the $98 million term sheet that says We’re willing to pay you $98 million and we will accept the collective bargaining agreement as is if you’re if you’re evaluating those two, you need to really understand what changes are going to be made to the collective bargaining agreement, as you said, to assess the risk of is my union team going to actually accept these new terms?

00:21:22:24 – 00:22:03:16
Michael Blum: Attorney – Foster Swift Collins & Smith PC
Absolutely. And to look at it in a more simplistic way maybe is unlike the stock transaction where, you know, the liabilities and obligations are pretty much automatically flow in an asset sale. The real question is what does the transaction involve? What is the buyer buying? What is the seller selling and on what terms and usually on an asset sale, substantially all of the assets as the terminology used.

00:22:03:23 – 00:22:29:25
Michael Blum: Attorney – Foster Swift Collins & Smith PC
So they’re buying most of it. In the one we work together, there was a significant piece of the assets that was not purchased and that can be carved out, all spun off. And so but the question becomes what is the buyer willing to purchase? What is the seller willing to sell? And that is the fundamental basis of an asset sale, much more flexibility in negotiations over that.

00:22:30:07 – 00:23:13:17
Michael Blum: Attorney – Foster Swift Collins & Smith PC
And then once you just terminate what the seller is allowing, what the buyer is willing to buy, then the question becomes at what cost? And it’s that at what cost that this due diligence becomes critical. Because if you know all of the liabilities because you’ve done your due diligence, then you can allocate the liability in the purchase agreement, the asset purchase agreement, where you could really have some problems after the transaction is that something was known at the time of the closing and for instance, withdrawal, a liability on a pension plan that could be very, very expensive.

00:23:15:01 – 00:23:24:17
Michael Blum: Attorney – Foster Swift Collins & Smith PC
All of a sudden that transaction has a whole different value to it, right? So that’s the type of thing that needs to be explored thoroughly.

00:23:24:26 – 00:23:48:07
Ron Reed: CEO, Managing Director – Cascade Partners
And we’re selling a business right now that has a union. And the important evaluation we’re going through is they they intend to change the CBA. And so as part of our assessment of term sheets, we’ve asked them to redline the CBA. So send us back your changes and then we can evaluate which terms we’re going to accept based on the risk assessment.

00:23:48:07 – 00:24:05:28
Ron Reed: CEO, Managing Director – Cascade Partners
Because if we’re going to be on if we’re at risk of the union, suddenly we’ve added an additional negotiator to this process and that negotiator is now the union. And if we’re going to address that risk, we need to address it right at the termination process.

00:24:06:01 – 00:24:51:26
Michael Blum: Attorney – Foster Swift Collins & Smith PC
Oh, absolutely. And another thing you need to remember when you’re looking at these deals is we’re talking assets what’s an answer? Well, the one of the assets of any company is if it’s a union company, is its relationship with its unions and its employees, because a company that has employees that are all pulling in the same direction, all satisfied with what’s going on, there’s good labor relations that has value so you need to look at the history of grievances, arbitrations, strikes, things like that.

00:24:52:04 – 00:25:30:06
Michael Blum: Attorney – Foster Swift Collins & Smith PC
Yeah. And if you have a company where the relations with the union are longstanding and there they work together, you know, that’s something that as the buyer, you might want to buy that good labor relations, right? It might be something that you’re willing to pay a little more and not disrupt the applecart. You know, the opposite side is if you have labor relations that just are not acceptable, then you got to figure out why, what needs to be changed and how to correct that.

00:25:30:19 – 00:25:35:03
Michael Blum: Attorney – Foster Swift Collins & Smith PC
But again, that goes to the value of the company and historically.

00:25:35:17 – 00:26:05:27
Ron Reed: CEO, Managing Director – Cascade Partners
Private equity firms historically were reluctant to step into a union situation. We see that changing as the as the path becomes more well-worn, even for relatively smaller businesses. You know, 150 to $500 million businesses, private equity people are probably funds are becoming much more sophisticated. And in learning that the fears they had of labor relations and unions are not quite as warranted, as the movies might portray.

00:26:06:06 – 00:26:37:11
Ron Reed: CEO, Managing Director – Cascade Partners
So we’ve been very fortunate here because most of the firms which we represented had fairly strong relationships to the business we just worked on recently. They had a very good relationship with their union, so it’s really not an issue at all. And again, we addressed we were we spent a lot of time addressing, got it right up front in the terms sheet, and it was fairly nonevent, if you will, from the time we closed the timesheet all the way to the OR at the time that we announced this to the union all the way to the close.

00:26:37:11 – 00:26:40:20
Ron Reed: CEO, Managing Director – Cascade Partners
It wasn’t really that disruptive to operations.

00:26:40:21 – 00:27:12:00
Michael Blum: Attorney – Foster Swift Collins & Smith PC
Right. And that’s what you strive for that’s what you want because what you don’t want is surprises. Correct. And the surprise, just by way of example, is you haven’t thought through some of the issues. You exercise your right to set the initial terms and you show up on day one, starting up your new business. And the employees have all walked out and they all have picket signs in their hands or leaflets or whatnot.

00:27:12:00 – 00:27:16:13
Michael Blum: Attorney – Foster Swift Collins & Smith PC
So now all of a sudden you’re saying, oh, oh, boy, what I do? Well, I don’t think.

00:27:16:13 – 00:27:38:22
Ron Reed: CEO, Managing Director – Cascade Partners
That’s the purpose of this. This actual conversation is, you know, getting in front of these things is the difference between disruption and a nonevent. And we’ve been very fortunate, both the firm and working with you to make these really nonevents but they take a lot of rolling your sleeves up during the terms and the purchase process to make sure they’re done right.

00:27:38:27 – 00:27:39:16
Michael Blum: Attorney – Foster Swift Collins & Smith PC
Absolutely.

00:27:39:26 – 00:27:54:18
Ron Reed: CEO, Managing Director – Cascade Partners
So last thing I wanted to talk about is the benefits plan a little bit more, talk a little bit about some of the risks and the benefit plans you mentioned in the lunch and learned that there can be some real gotchas there. Maybe you could talk a little bit about some of those.

00:27:54:29 – 00:28:26:02
Michael Blum: Attorney – Foster Swift Collins & Smith PC
Well, the benefit plans and that’s a little bit outside the labor and employment world you have employee benefits lawyers that handle that specifically. And we worked with one in the transaction that we work together on and the employee benefits brings in a risk claims for the most part in the private sector, the controlling statute so I don’t want to drill into that because I’m not an employee benefits lawyer.

00:28:26:12 – 00:28:55:09
Michael Blum: Attorney – Foster Swift Collins & Smith PC
But from the employee benefit standpoint, you know, what are the benefits? There’s going to be plan documents in place no matter what the plan or the benefit is, there’s going to be a plan that describes it and so, you know, if they’re standalone benefit plans, then you have to make sure you have all those plan documents. You have to see what the rights of the seller and what the rights of the buyer.

00:28:55:09 – 00:29:20:05
Michael Blum: Attorney – Foster Swift Collins & Smith PC
By way of example, can a 41 K plan be adopted by the buyer? There may be something that can be done. It may not be something that can be done. You have to take a look at that. If it is something that can be adopted by the buyer, is the buyer willing to do that or is the seller even willing to have that happen?

00:29:20:05 – 00:29:47:24
Michael Blum: Attorney – Foster Swift Collins & Smith PC
Maybe they’re only selling a piece of it and they want to hang on to that plan. So you need to look at what pieces of the plan or what plans are being adopted. In, can they be adopted. So that’s all going to be controlled by the plan documents. The employee benefits lawyers need to take a look at where it gets more complicated is with the defined benefit plans and the multi-employer plans that we talked about.

00:29:48:03 – 00:30:17:16
Michael Blum: Attorney – Foster Swift Collins & Smith PC
And that’s when you really need to look at what they call participation agreement, which will set the requirements. Now, let me just back up the CBA a between the company and the union will say the employer must contribute X amount of money, right, on behalf of each employee into the pension plan or that Benjamin Plan is administered by trustees and the trust agreements are a separate legal entity.

00:30:17:27 – 00:30:39:20
Michael Blum: Attorney – Foster Swift Collins & Smith PC
So now you need to get into those participation agreements and see what the requirements are and the terms are. So that’s where you have yet another set of documents you’re going to need to look at, and that’s where you might potentially have issues of withdrawal, liability, and one that’s so well, those are pretty complicated issues for a short discussion.

00:30:39:29 – 00:31:06:24
Michael Blum: Attorney – Foster Swift Collins & Smith PC
But the most important thing is make sure you look at what benefits are in place, what plan documents control and make sure that you have all of those plan documents in hand. It could be a policy, it could be, you know, an agreement or whatever, but you have to make sure you have them. And then if it’s a plan, particularly a multiemployer plan, you need to look at your participation agreements.

00:31:07:06 – 00:31:17:03
Ron Reed: CEO, Managing Director – Cascade Partners
Well, I can say here at Cascade Partners, we really enjoyed working with Foster Swift Team and I’m forever grateful. And thank you for showing up.

00:31:17:12 – 00:31:21:27
Michael Blum: Attorney – Foster Swift Collins & Smith PC
It was our pleasure. Yeah, we really appreciated the opportunity.

00:31:21:27 – 00:31:25:09
Ron Reed: CEO, Managing Director – Cascade Partners
And with that, we’ll end this Cascade conversation. OK, thank you.

00:31:25:09 – 00:31:25:22
Michael Blum: Attorney – Foster Swift Collins & Smith PC
Thank you.