Prior to the acquisition of a company, the buyer has an opportunity to review all the records and documentation of the seller to assess the health of the company. This "due diligence" includes an audit of the human resources function. The seller then has a clear picture of the costs of the human side of the business.
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Employment and Position Data
The seller should turn over an up-to-date organizational chart showing all management levels, supervisors, reporting hierarchy, and any future expansions that were in process. Also, any plans to downsize should be revealed. In addition, the resumes and job descriptions for senior level executives, directors and department heads should be made available for review. In the case of a merger, redundancy in positions and gaps should be noted. Compensation packages, bonus programs, employment contracts and offer letters also should be reviewed.
Benefit and Safety Plans
Due diligence should include a complete review of all benefit plans, the company's percentage of premium contributions, summary plan descriptions and 5500 tax filings for the past three years. Workers' compensation claims and loss runs, accident reports, OSHA 300 logs, short- and long-term disability open cases and retirement plans should be fully audited.
Legal and Compliance Data
Past and pending legal actions can be costly and a public relations nightmare. They affect the reputation of the company and its future profitability. Any complaint filed with the Equal Employment Opportunity Commission, claims of sexual harassment, workplace violence issues, lawsuits against the company, its officers, employees and products should be part of the due diligence. Fines and findings of violations from OSHA, the Department of Labor, and The Department of Homeland Security, ERISA or any other legal actions affecting employees or employment policy or implementation should be part of the due diligence.
A complete list of all active employees and terminated employees for the last three years is part of the process. HR documentation such as employee permanent files, I-9s, disciplinary actions, terminations, layoffs, medical files, the employee handbook and any other written policies or procedures should be thoroughly reviewed.
Union and Other Contractural Agreements
Current union contracts, grievances and recent activity; foreign worker visa status, consulting and contractor agreements and any contracts with employment recruiters, temporary agencies, background screening and training companies are a part of the HR due diligence.
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