Company A is preparing to acquire Company B.  What are the requirements of "A" regarding "B's" staff?  Is "A" required to have the "B" employees fill out applications for "A" and sign new employee documents for "A"?  Would/Should "A" perform background & drug tests on "B's" employees as per the normal policy with potential employees?  We want to be sure to cover all that is required.



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  • Most things are not "required."  If you have a general policy on applications, or if you find the current applications used by the former employer to be inadequate, I imagine you can make everyone mad and have them fill out new applications.  As far as drug testing existing employees acquired through M&A action, you should consult an attorney familliar with the drug testing laws in the state where those employees are located.

    Definitely conduct an I-9 audit.

  • It will depend a bit on the acquisitions details, but honestly, the acquisition I worked had such abyssmal HR prior to us that there was NO way I was going to keep their paperwork as ours, even if I could. I did a full hire file including updated I-9s.  We did not do background checks...mostly because the takeover happened so fast.   You can't go wrong by setting up new policies and files immediately.  That way you know they are correct and complete.

    However it might also depend on how long it is going to take to transition things like  Payroll, employee benefits, etc.  Often the 401k is the one that takes the longest to merge because of plan document issues.  You want to keep all of the prior files up to date with that information as long as it exists in its old format and under its old EIN/name.  We acquired and stayed under the old name for a couple of months and then switched to the new EIN/name.

    It might also depend on where in the acquisition process HR is brought in. You will have more leverage and say if you are in on the details from the beginning and have time to plan.  Often however HR is not brought in until after all the decisions are made.

    A couple of things to check on the payroll side are: year to date numbers...does FICA start over? Will you have to do two W-2s under two EINs?  Will your unemployment YTD numbers carry over?  Those questions have different answers depending on the details of the acquisition.


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