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Mergers and Acquisitions: Employing Employees

Excerpts from this article first published in ‘Human Resources’ Magazine, Issue 73, 8 February 2005

A recent decision highlights the legal issues associated with making representations to employees as part of a merger. In Lythgoe v Baycorp Advantage, Data Advantage employed Mr Lythgoe as General Manager but then promoted him to Managing Director. Mr Lythgoe entered into a written fixed term contract for 2 years. During 2001, Data Advantage merged with Baycorp to form a new company called “Baycorp Advantage”. As part of the merger, Mr Lythgoe was offered employment as Director of International of Baycorp. However, upon the expiry of the fixed term, Mr Lythgoe’s contract was not renewed.

Mr Lythgoe brought a claim under sections 51A and 52 of the Trade Practices Act alleging that Baycorp had made misleading and deceptive representations in “trade and commerce” that he would have ongoing employment after the merger and about his entitlements upon termination. Mr Lythgoe also alleged that his employment transferred from his existing employer, Data Advantage, to Baycorp which meant his existing contract which contained the fixed term no longer applied.

Justice Weinberg of the Federal Court held that the evidence did not establish that Baycorp had made any misleading or deceptive representations to Mr Lythgoe. Because there were no written records or agreements, Justice Weinberg had to assess the credibility of the witnesses. He preferred the credibility of the Managing Director of Baycorp rather than Mr Lythgoe. Justice Weinberg also found that Mr Lythgoe continued to be employed by Data Advantage and therefore his fixed term contract continued to apply.

HR Tips

• Where there is a merger between 2 organisations, make sure that employees’ terms and conditions of employment are set out clearly and in writing.

• Make it clear to employees which of the merged entities is the employer. As this may affect the contract and other terms and conditions of employment.
  
  

Michael Seck

Senior Associate

Australian Business Lawyers