Startup Law: If I have an employment contract with my employer, and the employer is bought by a different company, does the new company have to honor my contract or can they fire me at will?

Thanks for your question! This response will provide a brief overview of indicia you can use to see if your new employer must honor your old employment contract. Your contract is binding on your new employer if it originally contained a survival or assignment clause. Survival clauses dictate how the contract will be handled after a company is sold. Assignment clauses provide that the new company will take on all the old company’s contractual obligations. If you are not sure that your contract does contain either of these documents, please forward your agreement to me along with the company purchase agreement so I can read it.

In general, without a survival or assignment clause, employment contracts set forth very specific terms between the employee and the employer, such as health care benefits, job responsibilities, bonuses, confidentiality procedures and non-compete restrictions. If the company that originally signed the contract is sold, the original agreement is no longer binding, as one of the parties no longer exists. However, many employment contracts cover potential mergers, company buyouts and other changes of circumstances. Your contact could also contain an anti-assignment clause that would prevent the new company from honoring your previous agreement. If all else fails, you could ask the new firm to negotiate a new contact with you.

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