Monday is Labor Day, a time when many of us get a long weekend for, in the words of the U.S. Department of Labor (DOL), “a yearly national tribute to the contributions workers have made to the strength, prosperity, and well-being of our country.” With that in mind, I thought I’d take the opportunity to point out some of the great resources the DOL provides for American workers, and how those resources can be used during a pre-transaction due diligence investigation to get a glimpse of potential labor issues facing an acquisition target company.
So what exactly is the Department of Labor?
The DOL is a federal agency that seeks to “to foster, promote and develop the wellbeing of the wage earners, job seekers, and retirees of the United States.” As such, the DOL has numerous programs and agencies that help it meet this goal, and being a government agency, most of its records are public and can be used to learn about companies.
3 Public Resources for Investigation
Below are three types of DOL records I routinely check while conducting a pre-transaction due diligence investigation into a company.
1. Form 5500 Filings
The DOL requires that companies annually submit a Form 5500. This filing is used as a check on employers to make sure benefits plans are operated and managed in accordance with federal regulations. A lot of information about a company can be gleaned by reviewing its Form 5500 submissions over the years, including:
- The number of active participants in the company’s benefits plan at the beginning and end of the filing year. When reviewing Form 5500 filings for a company over the course of many years, you can see trends in the company’s growth, or conversely, if it has lost employees. One note with this is that only a plan’s active participants are accounted for, and since some employees may choose not to participate in a plan, it is not an exact head count for a company.
- The total number of employees who terminated their employment with less than 100 percent of their benefits being vested. This may indicate whether there is a lot of staffing turnover among those with a relatively short tenure at the company.
- The plan administrator is listed on the Form 5500. This person is often an employee within a company’s accounting function and, in the case of smaller businesses, may even be the company’s Chief Financial officer. This information can be used to verify a person’s employment with a company and may help you identify a senior employee who is a good source for information about the company.
2. The Occupational Safety and Health Administration (OSHA)
This search offers insight into worker safety issues within a company. OSHA is an agency within the DOL that helps promote and ensure safe and healthy working conditions for American workers. As part of its role, OSHA conducts both planned and unplanned inspections based on a complaint at U.S. companies that fall under its purview. Publicly available information includes how a company did in an inspection and whether it was fined. This type of information can help inform a client about potential issues it may face with an acquired company, especially if the company has manufacturing or warehousing facilities or is in an industry in which safety is a concern.
3. The Office of Federal Contract Compliance Programs (OFCCP) Debarred Companies
The OFCCP is part of the DOL and is “responsible for ensuring that employers doing business with the federal government comply with the laws and regulations requiring nondiscrimination.” As part of that mission, this agency maintains a Debarred Companies list, which is a list of companies or individuals that have been declared ineligible to receive federal contracts because of violations of federal laws regarding discrimination and/or other employee rights violations. Needless to say, it would be a red flag in any due diligence investigation to find that a company is debarred from doing work for the federal government.
While this is by no means a complete list of all sources available to search when conducting a pre-transaction due diligence investigation of a company, it is a good reminder of the great sources the DOL offers that can help you determine if a company you are about to acquire has had issues keeping employees, with safety violations or if it has been sanctioned by the government for not complying with federal laws.