You can't merge two employees that both have payroll transactions.  That's a longstanding restriction that actually has a reason, in that the paychecks were calculated independently and merging the two employees together would cause a bit of mayhem with the say QB calculates taxes going forward.

This is just one more reason that the new restrictions are objectionable and half-baked.  Whoever came up with this and didn't think through it like a professional software engineer should be fired or removed from working on payroll, as they have demonstrated that they don't have the mental capacity to predict the issues they've created. These issues range from payroll compliance to technical issues to understanding that they have users with many, many years of payroll data in their files, who had no reason under the sun (and still don't) to provide all of the information QB is now requiring and to suddenly try to change their payroll to comply - when there's literally no reason to do so.