In a merger, there’s no guarantee of permanent employment

THE QUESTION
I work for a Canadian trucking company that is merging with another trucking company. Can they demand that all employees reapply for a job with the new company, or will our jobs just transfer over?
THE FIRST ANSWER
Matt Lalande
Principal, Lalande Personal Injury Lawyers, Hamilton, Ont.
Good question. In a merger, as opposed to an acquisition or takeover, two trucking companies would be combined into a single, larger trucking company by consolidating assets and liabilities under one single entity in order to gain market share. The transfer of ownership in a merger usually occurs via a share purchase agreement. When the purchaser acquires a target corporation through purchase of shares, the legal identity of the corporation normally remains the same even though the ownership has changed.
Assuming that you are a non-unionized employee – and not an independent contractor or owner-operator – you have nothing to worry about if the identity of your company remains the same. Successor-employer issues typically do not arise in share transactions, and normally any employee rights that existed prior to the transaction remain with the business after the transaction. There could be exceptions, however, if the transaction triggers “change of ownership” termination rights in the employee’s contract of employment, which is most commonly found in senior executive contracts. It would be up to the vendor to terminate such employment contracts prior to the sale or merger.
A problem may arise with acquisitions or takeovers. In an asset purchase, the sale usually terminates the employee’s employment with the vendor and the employment relationship does not automatically transfer to the purchaser. Under common law, an employment contract cannot be assigned by one employer to another, which makes things much, much more complicated. That is a question for another day.
THE SECOND ANSWER
Kelsey Robertson
Associate lawyer, Ukrainetz Workplace Law Group, Vernon, B.C.
Unfortunately, there is no guarantee of permanent employment. Employees can be asked to reapply for positions as a means for the company to determine which staff to keep after the merger. If you choose not to reapply for your position or are not the successful candidate, then your employment may be terminated.
If this happens, you would be entitled to notice of termination or compensation in lieu, in accordance with legislation, any employment contracts in place, and/or the common law (judge-made law). Keep in mind that employees receiving common-law reasonable notice have an obligation to “mitigate” their damages by seeking out comparable work and accepting such work if offered. If you do not reapply for your position, you risk receiving a reduced severance entitlement because you did not meet your duty to mitigate.
Your lack of co-operation may also reflect poorly on your commitment to the company. The interview process will give the new leadership a chance to understand your contribution and assess your role with the organization. If you want to move forward with the company, then it is in your best interest to co-operate with the reapplication process even if you resent the exercise.