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Why business mergers sometimes lead to discrimination lawsuits

On Behalf of | Mar 4, 2022 | Business Law

When two businesses merge, the results may include a larger market share and a stronger brand. Some mergers are subject to intense scrutiny out of concern that it will lead to monopolization or market domination in an industry or a specific community. If your merger isn’t going to drastically impact the entire region or an industry, then you are unlikely to face antitrust challenges.

However, to go from two separate companies to one streamlined organization, significant changes to the businesses will likely be necessary, and those changes bring other risks. Downsizing or strategic staff reductions are often necessary after a merger.

Letting workers go can lead to conflict

Businesses often take for granted that they can eliminate redundant roles and potentially say goodbye to a few problem employees while simultaneously trimming operating costs. However, sometimes the employees affected fight back and claim discrimination.

They might allege that you targeted them for inappropriate reasons. How can you prevent such claims from damaging your newly merged business?

Make final decisions only after careful review

Even if you already have a shortlist of workers that you would prefer to let go of because of performance issues or how they just don’t fit in with the company culture, your business needs to have specific metrics that they use for evaluating workers and making decisions.

Before announcing any choices, your company should carefully review the list of workers being let go across the whole company and in specific departments. Any sort of trend, such as the disproportionate representation of one race, one group or one gender, could lead to the terminated workers claiming that your decision-making process resulted in discrimination.

You may need to fine-tune the list so that no one group has more representation than others while also considering the demographics in the company and its different departments after the downsizing.

Discrimination allegations could hurt your budget and your brand

If a group of former employees sues your company alleging discrimination, you may spend tens of thousands of dollars defending the company. Even if you win in court, the allegations could still hurt your company’s reputation as an employer.

Being proactive about preventing claims that lead to business litigation can help you make the most of an upcoming business merger while minimizing the risk.