Carve Out Law and Legal Definition

Carve out, in the business context, refers to a partial spinoff of a company. It is a situation in which a parent company sells a minority share of a child company, usually in an IPO, while retaining the rest. The child company will have its own board of directors and financial statements, but will benefit from the parent company's resources and strategic support. Usually, the parent company will eventually sell the rest of the child company in the open market.

In the labor context, carve out refers to establishing a separate bargaining unit with employees who previously were included in a larger unit. Generally, this practice is prohibited whenever an ongoing effective and productive relationship between the already established larger unit and management are found to exist.