We are acquiring who?
Acquisitions of companies infer the acquisition and responsibility for all of the company’s employees. And often, with responsibility, comes liability.
In many of the acquisitions with which we have assisted our clients, a big item often overlooked – because it is not there – is what information is missing from the personnel files. What is usually missing is an employee pre-hiring background report for each employee. Some employees were hired so many years ago that, quite frankly, it was not a big deal to hire someone without a background check.
So not only do you have employees with no background checks, you may have employees who have been employed for a number of years with “legacy” issues. In one company that was acquired by someone who later became our client, they were faced with multiple issues.
The acquired organization was a delivery company. Not only had the previous employer systematically underpaid their employees for the last 9 months, but, our investigation revealed, many of the employees were ex- cons and violent felons.
The acquiring company did two things: They, crosschecked time cards to pay, and they matched and checked driver’s licenses. That was it.
What they failed to check was the policy that no one was paid until they had their first call for delivery, even though they were in the yard, sometimes for hours, before they began their day. As it happens, this is against their contract, which states they have to be paid from the moment they report for work.
It was a very costly disaster when the new owners were forced to pay all of the back pay. The new CEO contested this decision very publicly, and he was threatened with physical violence, by people who had had been violent in the past, according to subsequent background checks.
This acquisition was a dual failure. It failed on economic terms that should have been discovered and avoided pre-acquisition, and it failed on safety issues for the executives, who for several months, were taken to and from work by armed guards.