How do I transfer employee HR records in a business sale?

HR records are information about identifiable individuals, which PIPEDA defines as personal information, so privacy rules apply to sharing them. Privacy law governs what may be shared and when; employment standards law governs what an employer must record and keep. Who holds which files at closing is something to settle in the sale agreement.

Privacy rules decide what can be shared before closing

Under section 7.2 of the federal Personal Information Protection and Electronic Documents Act (PIPEDA), parties to a prospective business transaction may use and disclose personal information without the individual’s knowledge or consent if an agreement requires the recipient to use it solely for purposes related to the transaction, protect it with appropriate safeguards and, if the deal does not proceed, return or destroy it within a reasonable time. The information must also be necessary to decide whether to proceed and, if the parties proceed, to complete the deal. Neither consent-free route applies to a deal whose primary purpose or result is buying, selling or leasing personal information (subsection 7.2(4)).

After closing, the files can follow the business

If the transaction is completed, subsection 7.2(2) lets the parties use and disclose that information, again without the individual’s knowledge or consent, if an agreement requires each of them to use it solely for the purposes for which it was collected, permitted to be used or disclosed before completion, to protect it with appropriate safeguards and to give effect to any withdrawal of consent. The information must be necessary to carry on the business that was the object of the deal, and one of the parties must notify the individual, within a reasonable time after completion, that the transaction has been completed and their information disclosed, as a condition of that consent-free route.

Which privacy law covers your employees

PIPEDA’s application section covers personal information that an organization collects, uses or discloses in the course of commercial activities, and information about an employee of, or applicant for employment with, the organization that it collects, uses or discloses in connection with the operation of a federal work, undertaking or business. Check whether a provincial privacy law also applies to your employees; the Act lets the Governor in Council exempt an organization, activity or class from its application, for collection, use or disclosure within a province, where substantially similar provincial legislation applies.

Employment standards records have their own rules

Ontario’s Employment Standards Act, 2000 requires an employer to record each employee’s name and address, the date employment began and the hours worked, among other items, subject to an exception in subsection 15(3) for some salaried employees’ hours. Under section 15 the employer must retain those records, or arrange for another person to, for set periods; for the name, address and start-date records, that is three years after the employee ceased to be employed by the employer. Section 9 deems a hired employee’s time with the seller to be employment with the purchaser for later calculations of length of employment, unless the purchaser hires the employee more than 13 weeks after the earlier of the employee’s last day with the seller and the day of the sale (subsection 9(2)), so the start-date record bears on that calculation. See also What records do I need to keep after selling?