Should I fix HR problems before planning a sale?

BDC’s guide to selling lists a step for owners preparing a sale: identify and address any potential legal questions, such as employee or environmental issues. Unresolved HR problems are therefore part of the preparation, not something to leave for the buyer to find. This page is about fixing problems before you plan; moving records at closing is a separate question.

Why a buyer will look at your employees

BDC says buyers assess risks including key employee reliance, and its due diligence guidance tells buyers to review employee turnover records and look for high turnover. BDC also says that, ideally, comprehensive preparation minimizes surprises, and that buyers present due diligence findings that affect their valuation, leading to price chips or adjusted deal terms.

Service history can follow the employee

Employment standards law is set by each province and territory, plus Ottawa for federally regulated employers. In Ontario, the government’s guide to the Employment Standards Act explains that length of employment with the seller of a business flows through to the purchaser, so an employee the purchaser hires does not start as a new employee for entitlements based on length of employment. The exception is an employee hired more than 13 weeks after the earlier of their last day with the seller and the day of the sale. The guide’s examples include a purchaser liable for vacation pay an employee accrued with the seller, so check what your own jurisdiction says.

Sort what to fix

• Fix now: missing written contracts, unclear roles, and records that are incomplete.
• Take to a lawyer: a dispute, a complaint, or a doubt about how someone was classified or paid.
• Disclose rather than fix: a problem you cannot resolve before a buyer asks.

Protect employee information as you go

Employee files hold personal information. The Office of the Privacy Commissioner says PIPEDA applies to the personal information of employees of federally regulated businesses, and provinces have their own privacy rules. Limit who sees personnel files while you prepare, and ask your lawyer what may be shared with a buyer and when. Our page on what happens to employees when you sell covers what comes after.