When conducting due diligence in connection with the purchase of a business, make sure that you understand the amount of accrued leave the seller’s employees have earned. Otherwise, you could face a rocky start with the employees. Many states require a company to pay employees accrued leave on termination of employment. Aside from laws, many companies adopt policies by which accrued leave is paid at the end of employment. There are many dynamics at play – a seller may have substantial accrued but unpaid leave on its books which it prefers not to pay on the transfer of its business; if the seller does pay the accrued leave, the employees may be under a misconception that they can still take vacation days and will expect to be paid for those days; it is also possible that a purchaser can be held liable for accrued pay as a successor. The last thing you would want as a purchaser is to not account for accrued leave pay, and for your new employees to expect to take accrued vacation on your nickel. It is therefore important that you understand the amount of the accrued leave, and then negotiate a resolution of that amount with the seller as an adjustment to the purchase price.
ABOUT GLENN D. SOLOMON
Glenn D. Solomon Esq., is a principal at the law firm of Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years, with extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress
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