Employment Considerations In Healthcare M&A

The Workers Adjustment and Retraining Notification Act (WARN), provides that employers must give advance notice to its employees prior to any closing or mass layoffs.[1] An employer who violates this act is liable to each employee affected by the violation.[2] Penalties for violating the WARN Act include the average highest wages earned by the employee for the past 3 years, the payout of medical benefits, and civil penalties. With the exception of medical benefits, all of these penalties accrue each day of the violation period, with wage payouts to all the employees affected by the violation.[3]

The health care industry is massive but not untouched by layoffs and branch closings. Due Diligence must be done to expose any WARN triggering event prior to closing and if so, were all the WARN requirements filed promptly and accurately. As one of the biggest industries in the country, the healthcare industry employs a significant number of employees. Thus, Healthcare organizations can incur massive amounts of accumulated penalties which affect the bottom line and put the deal in jeopardy.

Another employment concern which requires due diligence is immigration and the immigration status of those employed in the healthcare industry. According to the U.S. Bureau of Labor Statistics foreign-born workers comprised 5.2% of the healthcare labor force.[4] That amount rises even higher when you include immigration employment in healthcare supportive roles such as hospital maintenance (8.4%) and Personal care (4.3%).[5]

Employment concerns include documented and undocumented immigrants. Immigrant doctors, nurses and other employees presumably require specific work Visas as a condition to their employment eligibility. Visa requirements need to be maintained to prevent the risk of penalties and loss of talent. Undocumented immigrants working in the healthcare sector are cause for concern and can be a violation of laws in and outside of immigration. Proper employment classification is necessary for a healthcare transaction because it directly affects tax liabilities. Presumptively undocumented workers are likely to be classified as independent contractors instead of employees even when they work long hours and for less pay. Employee misclassification can result in higher tax burdens or penalties, as well as, legal liabilities with respect to potential wage and hour laws. Therefore, healthcare M&A transactions involve extensive employment due diligence to prevent these unwanted penalties.

[1] 29 U.S. Code § 2102 – Notice required before plant closings and mass layoffs

[2] 29 U.S. Code § 2104(a)

[3] 29 U.S. Code § 2102(a)3

[4] https://www.bls.gov/opub/ted/2016/foreign-born-more-likely-than-native-born-to-work-in-service-occupations.htm


[5] https://www.bls.gov/opub/ted/2016/foreign-born-more-likely-than-native-born-to-work-in-service-occupations.htm

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