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GVPOD is the podcast of the Greater Vancouver Board of Trade. President and CEO Bridgitte Anderson talks to leaders in the business community about the challenges and opportunities they experience, as well as issues impacting our region.
0:00:02.2 [BRIDGITTE]: Welcome back to GVPOD Greater Vancouver’s business podcast. I'm Bridgitte Anderson, President and CEO of the Greater Vancouver Board of Trade. This episode is part of our series, the R-word, and we're talking about how business leaders and business owners can prepare for the economic uncertainty we see ahead and yes, whether there is in fact a recession, this is the second part of our dive into mergers and acquisitions with the help of the expert legal team at Clark Wilson LLP here in Vancouver. And today we're talking employment joining me for the conversation is Andrea Raso, partner and chair in employment and labor at Clark Wilson. Welcome, Andrea.
0:00:43.7 [ANDREA]: Thank you, Bridgitte. It's nice to be here.
0:00:46.1 [BRIDGITTE]: Well, mergers and acquisitions are complex to say the least, and they're usually fairly risky, there is the operational side of bringing together business units, systems, processes, procedures, and then there's the bringing together of the people and the culture, so Andrea why is it then that the human resources side of it is often not prioritized as much as operations...
0:01:11.8 [ANDREA]: Well, thanks for the question, Bridgitte. When a company is looking to acquire another company, typically it's the assets that they're looking to buy, and much of it is focused on the financial aspect of it, what is often forgotten is that in some cases, the human resources are the actual assets that the company is purchasing, and often, mines are not turned to how we will deal with these people until well into negotiations on the merger and acquisition, it's really important that at the time that a business starts looking to buy another business or a business is looking to sell their business, that the human resources issues are front and center at the very beginning.
0:02:05.4 [BRIDGITTE]: So as you say, people power a business, so that people approach should be front and center. When should the conversations begin with the people on both sides, there are obviously legal risks and there are things that cannot be said until certain markers have been passed, but when you start the conversation?
0:02:28.0 [ANDREA]: Yeah, so that is a very tough question. Oftentimes, companies don't want employees or the general public to know that there are discussions going on, so in the early stages, the bulk of the employees, other than those that are involved in negotiations, will likely not know what's going on, the point in time at which the employees need to be involved is when it looks like this transaction is going to go through, and both parties want to ensure that those individuals that are gonna be kept on are given enough time to consider what this acquisition means to them and what it means to the terms and conditions of their employment. And so this will often be at least, and it varies all the time, but at least a month in advance of closing is really when we say that is the best time to reach out to your employees, tell them that this is going on, verbally tell them what they can expect and then follow up with the necessary paperwork, that really is best practice, the companies that are shy to bring this up because of fear that employees may leave thinking that they're going to be let go.
0:03:52.0 [ANDREA]: The reality is, rumors get around and employees know when something is up, and I think it's worse to leave employees in the dark and guessing about what's gonna happen rather than hearing it from management directly.
0:04:04.9 [BRIDGITTE]: And that goes, I think directly to employee engagement and the employee experience and how important it is to have the employees along on the journey at the appropriate time... Now, M and A activity, obviously looking for efficiencies on the operational side, and so that of course extends to the people in the business, and that often means restructuring, especially now with the kind of economic headwinds that we're all facing in the business community. So people do often lose their jobs in M and As, and how is the best way to approach that restructure, and we have heard stories of two organizations coming together and mass layoffs and being done maybe without that sort of emotional intelligence that's required. But what are some best practices when knowing that you're gonna have to restructure...
0:04:55.9 [ANDREA]: Yeah, so in a large partner would depend whether or not you're in a unionized workplace or a non-unionized workplace, so if you're in a unionized workplace, you are somewhat limited in the flexibility in terms of what that restructuring looks like. Obviously, one of the first things that has to be done is the Union needs to be notified. Collective agreements will set out when the unions need to be told of a change to the workplace that will affect a significant number of employees, apps in the collective agreement, the timeline under our labor relations legislation is 60 days in advance of when that restructure is going to take place. From there, in terms of who is let go and who has kept on is very much determined by seniority under the collective agreement, so the employer generally has little flexibility in terms of who goes and who stays, most collective agreements will say that layoffs or outright terminations occur in reverse order of seniority, and then there were bumping rights along the way, so that's very much dictated when you are in a unionized workplace.
0:06:09.8 [BRIDGITTE]: It's a bit trickier when it's not unionized though, doesn't it?
0:06:12.9 [ANDREA]: It is trickier, and one thing I do say about unionized workplaces is that the employer should still feel free to have communications with employees, make sure the union knows first, but don't be shy to have those one-on-one communications with your employees. They are yours and they will have questions in your best to answer them in a non-unionized workplace, the employer has a lot more flexibility in terms of how it restructure, so there are no seniority obligations, there aren't been any obligations in terms of merit, an employee, an employer who is in a non-unionized work environment has the right to terminate any employee at any time for any reason, unless it's in violation of a statute, such as human right. Human Rights Legislation. And so it doesn't even have to be on merit, it can purely be on a cost basis, it can purely be that this employee is too expensive, and while we like their work, we just can't afford to keep them, and the employer has that flexibility to choose that employee, even if they are the longest-serving employee, even if they're in a position of quite high within the organizational structure, the only thing that the employer has to be mindful of is that those longer service employees who are in higher ranking positions typically tend to attract more severance, more notice.
0:07:46.7 [BRIDGITTE]: Exactly, there is required severance. Most employers, I think, go above what is the minimum to avoid any kind of legal complications, but what about those employees that could be on a maternity or paternity leave or mental health leave, or a physical health leave, how do you factor those people in
0:08:05.7 [ANDREA]: And they often get forgotten about in mergers and acquisitions.
[BRIDGITTE]: Out of sight, out of mind
[ANDREA]: Exactly right. I mean, when there is an acquisition, typically, if the purchaser is taking on the employees, they wanna meet with the employees at some point prior to the closing of the transaction, and those on maternity leave are often forgotten about. And it's very important to remember that they are employees and they do have a special status, but they don't have a super special status, so you cannot terminate or discriminate against them because they are on some type of leave if it's a jaw-protected type of leave under Employment Standards legislation, but you do have to put your mind to, Are we gonna keep these individuals if we're not... What is the reason? We're not going to keep them. If you have 99 business reasons why you're going to let that person go, but one of those of your 100 reasons have something related to the fact of the leave, then you're gonna be in trouble, so they need to be dealt with very carefully. That doesn't mean that they cannot be terminated or re-structured out... They absolutely can be. If it is for legitimate business reasons, the communications are very important, and the timing of when they're given notice is really important, and that will vary on in terms of what type of leave they're on, when they're due to come back.
0:09:33.8 [ANDREA]: If we know the point in time when they're gonna come back, so there are a lot of special considerations around that, and they have to be top at mine with any merger and acquisition or restructuring.
0:09:44.8 [BRIDGITTE]: You know you said the key word, I think in all of this is communication, which goes back to the beginning of the conversation about when you bring employees in the loop, I mean, this is a big disruptive event for employees, let alone for the organizations that might be merging or one being acquired, that you can't forget that more communication is best, and that is sort of the golden rule.
0:10:10.0 [ANDREA]: Yeah, absolutely, and it is being very strategic from the very beginning when those communications are going to occur, how they're going to occur, and when you have two parties and play a vendor and a purchaser, those two parties have to be on the same page, and sometimes it takes a lot of time to get on the same page, and that's why a lot of thought has to be put into it from the very beginning.
0:10:33.6 [BRIDGITTE]: So what happens when they're not on the same page? And we have a dispute. I would think that employee rights have increased and become enhanced in recent years, so what kind of avenues are available to those folks who don't agree with their package or besides, of course, going to an employment lawyer is always a good idea to get to that kind of... Legal perspective, but are there other avenues like around mediation or things that can help in a case like this?
0:11:03.6 [ANDREA]: Yeah, I mean, absolutely. Mediation and the legal sphere is becoming more and more utilized, but one of the early uses of mediation was in fact in the workplace through labor relations, so very early on when labor law, so to speak, became a thing, it was... We're going to deal with our disputes and resolutions quite quickly through arbitration, but a big part of arbitration is also mediation, and oftentimes there's a metor the terminology we use, where an attempt is made to mediate the dispute, and so this is not something new in the workplace, and the benefits of it is that it really is flexible and you can adopt it based on the needs, so if an employee is terminated if the purchaser says, we don't wanna take this employee on and requires the vendor to terminate the employee, oftentimes, the employee will go to legal counsel and most employers are willing to talk... Right. Most employers are willing to say yeah, this has been an unexpected outcome of this acquisition, the first thing we do is we look at your contract if employment and what does that entitle you to... If the contract of employment is non-existent or is unenforceable because a termination language is not as precise as it needs to be, that mediation is definitely the way to go before lawsuit start, which neither the purchaser or the vendor want to have happen.
0:12:51.4 [ANDREA]: At the point that they're trying to synergise their businesses
0:12:56.2 [BRIDGITTE]: And make it smooth.
0:12:58.3 [BRIDGITTE]: So in your mind, Andre, what are some of the key traits of the most successful mergers and acquisitions when it comes to human resources, what are companies doing... Right, that you can reinforce.
0:13:10.5 [ANDREA]: Yeah, so the best thing is the conversation between the purchaser and vendor early on, so that there is an understanding between both parties, what is gonna happen to the employees, is the purchaser are gonna take all of the employees on in a unionized setting, the purchaser has to they just basically inherit the collective agreement, and then if they want to do layoffs, then they have to do that in accordance with the collective agreement, but in a non-unionized setting, the purchaser might say, We want all of the employees, we want none of the employees, we wanna hand pick some of the employees, so understanding that between the two parties is the most important thing, and that really should happen early on, and then the purchaser and the vendor should work together in terms of... This is so important, the communications, and again, we go back to communications, so there will be letters drafted by both parties, the purchaser or the vendor will be drafting letters, communications about the merger and acquisition, what will happen to the employment of the employees at the same time the purchaser will be wanting to communicate with those employees saying, Welcome aboard, here are your new terms and conditions, if they're going to change, and there are a lot of rules around that if the purchaser is coming in and changing roles, or if it's going to be...
0:14:33.5 [ANDREA]: We were not gonna take you on, it's so much better to have that conversation early on with the employee so they understand that the reasons for it and all of the issues about what they're gonna receive on termination can be resolved fairly quickly. And so when it comes to finalizing how much money is gonna be changed between the purchaser and the vendor, the amount of money that the vendor may have to pay to employees can be worked into that formula.
0:15:09.6 [BRIDGITTE]: Some really great advice, I know that the M and A activity is something that is watched very closely in times like now where there is a fair amount of economic headwinds, so really great advice today. Andrea, thanks so much for joining us.
0:15:22.7 [ANDREA]: It was my pleasure, thank you for having me.