Must we pay unemployment if we buy a business and let everyone go?

Question

My wife and I are looking to buy a restaurant. Will we be responsible for the employees' unemployment benefits if we terminate them? There are entirely too many people working there right now, and we figure the only fair way to reduce staff numbers is to terminate everyone and start fresh. All current employees would be welcome to apply for open positions, and will be given higher consderation.

Answer 1

This needs to be a part of your negotiation to buy the restaurant. You are buying the business, not the staff that work there. You are a new business entity. The current owner has (or should have) been paying into the unemployment system and these funds would be charged for anybody who is terminated as a result of the sale. Make sure you get good legal advice in setting up the terms of this purchase contract so that this issue is addressed. I would suspect that these employees are considered at-will employees, meaning there is no contractual obligation to keep them employed at the restaurant. If you can identify certain key employees that you definitely would want to keep, you may want to negotiate with them separately about the position/pay rate you would like to offer them.

Answer 2

1.) If you don't understand some of the basics of owning a small business, like unemployment insurance, you ought to think twice about investing in one,
2.) Putting your entire staff through the trauma of being fired and the anxiety of winning their jobs back is not going to win you any friends among the employees.

Answer 3

You don't pay unemployment, the state does. You will pay into the unemployment fund based on your wage paid experience. If you are buying a restaurant you will start with a clean slate. You should talk to a representative from your state unemployment compensation department and get all the required info.

Answer 4

Yes, but don't buy the business buy the assets and leave the employees with the old business.

Answer 5

Yes!