Managing Employees During a Business Divorce
Navigating a business divorce can bring up several issues, including the management of your employees. Businesses often rely heavily on the hard work of their employees to continue operating, making it essential to consider their well-being during this time. Depending on the status of your business, keeping employees happy might be crucial, or you might need to figure out how to let some employees go. Here are key questions to consider regarding your employees during a business divorce.
Can You Keep Employees or Do You Need to Let Them Go?
One significant consideration during a business divorce is whether you can retain employees. You might want to keep loyal or long-time employees on board, but this may not be feasible depending on your circumstances. For instance, cash flow problems or impending bankruptcy might necessitate employee layoffs, which could unfortunately reduce productivity or morale. The timing of when you announce the divorce is crucial if you need to let people go.
Ensure that you comply with local, state, and federal employment laws regarding the termination of employees or contractors. Some states have specific laws about employee rights during mass layoffs. Consulting with a business divorce lawyer can help you understand which employment and contract laws apply to your business.
If you plan to sell the business, some potential buyers might be willing to retain key employees. However, there are no guarantees, especially in at-will employment states. Consider whether employee retention is important for your business, as it might strengthen your bargaining position when negotiating a sale. Since retention can be a complex and emotional issue, discuss it at length with your business divorce lawyer.
When Will You Inform Employees About the Business Divorce?
Timing is crucial when notifying employees about the business divorce. Informing employees as late as possible might be beneficial. Additionally, consider carefully how you deliver the message. You could frame the business divorce as a mutual decision to end the business, or as a positive development, such as an acquisition by another company that will promote growth.
For many employees, news of a business breaking up or being sold can prompt them to start job hunting. After the announcement, you might see many employees decide to leave. If retaining key employees is important, consider offering bonuses or other incentives.
Before sharing the news, review any contracts your business has with its employees, such as non-compete agreements, nondisclosure agreements, confidentiality agreements, or independent contractor agreements. You and your business lawyer should be familiar with the contents of these agreements in case employees decide to leave, allowing you to address any potential breaches of contract.
What If You Are an Employee of the Business?
If you are both an owner and an employee of the business undergoing a divorce, be mindful of how the divorce will affect your status. Personal financial reasons might necessitate keeping the business running, as you could lose your job otherwise. However, as a business owner, you might also see that continuing to operate the business isn’t in its best interests. In this unique situation, it’s especially important to consult with an experienced business divorce lawyer to determine your best path forward.
Have Business Divorce Questions? Call Us
At Henke & Williams, LLP, we handle business divorces for clients in the Houston area, providing tailored experiences for each client because every business is unique. If you are facing a business break-up, contact us for legal advice. To set up a consultation, call 713-940-4500 or use our convenient Contact Form.
