Can a buyer hire the seller’s staff if the deal falls through?

There is no general answer in the sources for a buyer who walks away and then wants the seller’s people. The first place to look is the paper both sides signed before diligence. BDC’s description of a confidentiality agreement covers information, not staff, so check whether anyone wrote in a ban on soliciting or hiring employees. If a clause does bar hiring, check it against the Competition Act.

What the signed documents say

BDC describes a confidentiality agreement as a document prepared before or alongside the letter of intent, in which a party undertakes not to use, disclose or permit the disclosure of confidential information it receives during negotiations and due diligence, except to evaluate its participation in the proposed transaction. BDC adds that a letter of intent can create binding obligations where it says so, with confidentiality and exclusivity as examples. A no-hire term is a separate promise, so find it and read it.

• Who is bound: the buyer only, or also its affiliates, owners and advisers.
• What is barred: soliciting, hiring, or both, and which employees are named.
• Whether general job advertising that is not aimed at the seller’s staff is carved out.
• How long it lasts, and whether it applies if the deal ends.

What the Competition Act says

Section 45(1.1) makes it an offence for an employer to conspire, agree or arrange with another employer that is not affiliated with it to not solicit or hire each other’s employees, subject to the defences in s.45, including s.45(4) below. Subsection 45(3) lets a court infer an agreement from circumstantial evidence, though it must be proved beyond a reasonable doubt. A no-hire clause between a buyer and a seller who are both employers and not affiliated therefore needs a competition lawyer’s review. See also pay and hiring clauses under the Competition Act.

The ancillary-restraints defence

Under s.45(4), no one is convicted if they establish, on a balance of probabilities, that the arrangement is ancillary to a broader or separate agreement that includes the same parties and is directly related to, and reasonably necessary for giving effect to, its objective; the section also requires that the broader agreement, considered alone, does not contravene the subsection. Ask a lawyer what the broader agreement is when no deal is ever signed. The Competition Bureau’s collaboration guidelines discuss this defence, but their overview describes the 2009 amendments and they treat employee non-poaching agreements under the civil reviewable-matters provisions, so ask whether the Bureau has newer guidance on s.45(1.1).