Ahead of the merge

Mergers and acquisitions (M&As) are legal and financial transactions, but for HR professionals, they are operational change events with significant practical and legal consequences.

In Canada, the success or risk involved in an M&A transaction often turns on what management (including HR) does or fails to do in the planning and integration stages.

Here is a practical guide to what HR leaders should actively manage before, during, and after a merger or acquisition.

Get involved early — transaction structure drives employment risk

One of the first questions HR should ask is: Is this a share purchase or an asset purchase?

Why this matters:

• In a share purchase, the legal employer typically remains the same. Employees usually continue employment without termination.
• In an asset purchase, employees do not automatically transfer. There is often a termination by the seller and a new offer from the buyer — which can trigger notice and severance obligations.

Employment standards legislation often addresses when employment is deemed to be continuous. For example, in British Columbia, s. 97 of the Employment Standards Act specifically mandates that:

“If all or part of a business is disposed of, or the business continues to operate under a receiver or receiver-manager, the employment of an employee of the business is deemed, for the purposes of this Act, to be continuous and uninterrupted by the disposition or receivership, as applicable. “

HR action items:

• Confirm the transaction structure (share or asset purchase).
• Identify which employees are employed by which legal entity
• Flag potential termination exposure early so it can be factored into deal pricing.
• Ask who is responsible for pre-closing and post-closing liabilities.

Do not assume that all financial or legal issues have been fully mapped out — you as the HR leader will often have critical information about compensation structures and service history.

Map the workforce before closing

Before integration begins, HR should create a detailed employee inventory.

Build a workforce risk matrix including:

• Length of service (critical for severance exposure).
• Compensation breakdown (salary, bonus, commission, equity).
• Employment agreement status (Is there a written employment agreement? Is there a valid termination clause? Is there an assignment clause?).
• Union status.
• Employees on leave (parental, disability, medical, WSIB/WCB).
• Accommodation obligations.
• Active investigations or discipline issues.
• Key talent retention risk.

This phase often uncovers issues that materially affect post-closing plans.

Be careful with ‘offers of employment’ in asset deals

In asset transactions, the way offers are structured is critical.

If the buyer offers employment on substantially similar terms and recognizes service, this can reduce litigation risk because employees are often mitigating any damages by accepting employment with the purchaser. However, if there are material changes (lower pay, reduced bonus, inferior benefits, different role), employees may reject the offer and claim termination damages from the seller, or accept and later claim constructive dismissal for material changes.

HR action Items:

• Ensure offer letters/contracts are clear, complete, and legally reviewed and enforceable.
• Decide whether prior service will be recognized and for what purposes (vacation, severance, benefits, etc.).
• Avoid informal verbal assurances and make sure all terms are documented.
• Set realistic deadlines for acceptance.
• Make sure that there is coherent co-ordination on the timing of termination letters from the seller and new offers from the purchaser.

Avoid accidental constructive dismissal during integration

Integration is where many legal claims arise.

Common risk triggers include compensation restructuring, changes to bonus eligibility, reduced commissions, demotions and changes in reporting structures, relocation requirements, removal of remote work flexibility/hybrid work arrangements, and significant benefit plan reductions.

HR often frames these as organizational alignment. Courts may see them differently.

Furthermore, the seller may have employees that are on leave at the time of the merger or acquisition. It is critical to turn your mind to these individuals and any job protected leaves or accommodations in place for these individuals. Otherwise, there can be risks under employment standards and/or human rights legislation.

Practical HR safeguards include:

• Assess whether changes are material.
• Document legitimate business reasons.
• Consider phased transitions instead of abrupt changes.
• Consider employees on leave and/or under accommodations at the time of the transaction.
• Provide consideration (for example, a signing bonus or retention bonus) when asking for new contractual terms.
• Train managers not to say “Nothing is changing” if changes are contemplated.

Plan workforce reductions strategically

If redundancies are expected, planning matters.

In Canada, termination obligations may include employment standards minimums or common law reasonable notice, statutory severance in some provinces, and perhaps additional consideration of group or mass termination notice requirements.

In addition, the practical impact of a mass dismissal on morale and workplace culture can be impactful.

HR checklist before announcing dismissals:

• Confirm enforceability of termination clauses.
• Model severance exposure at common law.
• Determine whether group termination rules apply.
• Prepare compliant termination letters.
• Plan benefit continuation properly.
• Coordinate messaging to reduce morale damage, the nature need for continuing employees to deal with the workplace changes, and organizing risk.

Timing is key. Pre-closing versus post-closing terminations may affect which entity bears liability.

Manage unionized workforces carefully

If any employees are unionized, assume that there will be additional considerations. For example, in many cases successor rights provisions mean the collective agreement continues after the transaction.

HR considerations include:

• That you cannot unilaterally change labour terms.
• Workforce reductions may be governed by seniority and bumping language.
• Integration planning may trigger bargaining obligations.
• Poor handling increases grievance and unfair labour practice risk.

Engage labour counsel early and review the collective agreement before finalizing integration plans.

Benefits and disability: avoid gaps and liability

Benefits transitions are frequently underestimated.

High-risk areas include employees on long-term disability, pension plan transitions, changes to health or drug coverage, and waiting periods in new plans.

A gap in disability coverage can create significant liability.

HR action steps:

• Co-ordinate with benefits advisors well before closing.
• Communicate clearly about coverage continuity.
• Avoid benefit downgrades without legal review.

Protect employee data and investigation files

During due diligence and integration, HR data is shared — but not all information should be shared broadly. Sensitive materials may include medical documentation, accommodation records, harassment investigation files, and payroll or SIN data.

Practical safeguards include:

• Limit access on a need-to-know basis.
• Use secure transfer methods.
• Separate medical and accommodation documentation from general HR files.
• Align data retention practices post-close.

Privacy compliance varies across Canada, so jurisdiction matters.

Control the narrative: communication is legal risk management

What leaders say during an acquisition can later be used against them in litigation (and employees often maintain better notes on verbal exchanges than busy business leaders).

Risky statements include “Your job is secure,” “Nothing will change,” “You’ll be better off under the new company,” or “Everyone will be retained.”

Even well-intentioned reassurance can create expectations.

Best practice includes:

• Prepare scripted FAQs for your management team.
• Train managers before announcement.
• Avoid guarantees.
• Ensure offer letters and written communications align with verbal messaging.

Think retention, not just risk

Legal compliance is critical — but so is retaining key talent and ensuring that any changes are as smooth and calm as possible.

HR should identify critical employees, institutional knowledge holders, revenue drivers, and cultural leaders early in the process. Retention tools may include retention bonuses, stay interviews, clear integration roadmaps, and early role clarity.

A legally compliant integration that loses top performers is still a failed HR outcome.

Clarity for employees is key

In Canadian M&A transactions, the biggest employment risks usually arise from a lack of clarity in whether employees are continuing on with a purchaser or starting new employment (aka unclear service recognition), poorly structured offers, material compensation changes, unplanned terminations, and inconsistent messaging.

HR’s role is not just administrative — it is strategic risk management and it is key! When HR is involved early, maps workforce risk properly, and manages integration deliberately, organizations reduce legal exposure while protecting employee trust during a period of significant change.

Richard B. Johnson is a co-founder and partner at Ascent Employment Law in Vancouver.