Microsoft Corp. and LinkedIn recently announced that Microsoft will soon acquire LinkedIn in a transaction valued at $26.2 billion – click here for the company’s announcement.
Under the deal, Microsoft will purchase LinkedIn’s shares at $196 each. If a share sale like this happened in Ontario, the identity of LinkedIn would not change – Microsoft would simply step in to the shoes of LinkedIn. Microsoft would inherit all employees and employment-related liabilities and obligations of LinkedIn after the deal closed.
At that point, Microsoft would be permitted to change the terms and conditions of employment for LinkedIn employees, once nothing in any of their existing employment contracts specifically prohibit the changes. Plus, a new employer like Microsoft could change LinkedIn employees’ terms and conditions of employment once something of value is provided to the employees in exchange. The thing of value is called consideration, and it is required for a binding contract. For example, if Microsoft asked LinkedIn employees to sign new employment contracts with it that were not as employee-friendly as their pre-existing contracts, these employees should get consideration from Microsoft for the new contracts to be valid.
In this hypothetical example, if Microsoft changed employees’ terms and conditions significantly without employee approval, employees could bring claims of constructive dismissal. This occurs when an employer changes an employee’s employment so radically that the employee is effectively, i.e. “constructively” dismissed.
Proving constructive dismissal in court can be difficult. Regardless, any employer acquiring a company via share purchase – like Microsoft – will need to spend some time considering what changes, if any, it will make to its predecessor’s workplace terms and conditions, and whether these changes could amount to constructive dismissal. After spending billions of dollars on a share sale, most purchasing companies will be reluctant to spend even more on employee lawsuits.