As a business owner, your employees have been a key part of building your company. Some have offered leadership. Some have been the source of game changing ideas. And some just help you get the job done. If you're considering selling, you're probably concerned about what will happen to your team once the deal is done.

The fact is you can include a requirement or request that a buyer offer employment to your staff as part of your negotiation. Many buyers will need the knowledge, experience and reputation of some, if not all, of your employees to effectively run the business after the closing date.

A potential buyer of a business will want to examine the employment contracts for the key personnel within your organization. This is especially true for a knowledge-based business where buyers are acquiring far more than the tangible assets on your balance sheet. Employment agreements, non-competition, non-solicitation and/or confidentiality, non-disclosure agreements and other such documents intended to protect the proprietary rights of your business are important to a potential buyer. They should want as much assurance as possible that the know-how, knowledge and intellectual property of the business can't simply walk out the door or, worse, be lured away by a competitor the moment the purchaser takes over.

Having comprehensive and up-to-date employment contracts is an essential part of the documentation you must prepare and make available to a potential buyer. As you prepare and/or review these documents, particularly non-competition and non-solicitation clauses, you must remember that employees cannot be denied a right to earn a living. There is a delicate balance. In Ontario today, it is well established that restrictions exceeding what is reasonable, in the circumstances, to protect proprietary rights are not enforceable. Generally, non-solicitation clauses are preferred over non-competition clauses where the non- solicitation clause would adequately protect. A Court will refuse to enforce a restraint in trade provision in an employment contract if it concludes that the activity restrained is overly broad and unreasonable or the temporal or geographical restrictions are unreasonable.

So yes, your employees are real assets to your business. But to a buyer, they can represent potential liability too. For example, your employees are protected by individual employment contracts, common law,
the Employment Standards Act, and the Human Rights Code. These rights may not be affected by the sale of the business. An employee who has worked for the business for 12 years at the time of sale may be entitled to a significant severance package if the new owner decides to dismiss him or her two years after the sale.

So you can see why a company or individual that is considering purchasing your business will look very carefully at your employees and your employment contracts. A buyer would assume these contracts - and the associated claims for reasonable notice for termination, unpaid overtime, and disability benefits.

As a vendor, your business will be more attractive and valuable to a buyer if your employee contracts are properly drafted and enforceable. Working with the employment lawyers at Kelly Santini LLP before you begin the sales process will help eliminate many of the potential employment law issues that may arise during or as the result of a sale.