Liability for employees carrying on after sale of business

Clarifying the continuance of employment
By Leah Schatz
|Canadian Employment Law Today|Last Updated: 05/15/2019

Question: If a company sells a part of its business to another company (employees and all), does the new company have to provide the same compensation, benefits and pensions, or can it change any of these without risking liability?

Answer: This is something that the parties should consider at the front end of a transaction. Purchasers and vendors alike must turn their minds to labour and employment law issues when conducting the purchase and sale of a business. One central consideration is whether the transaction takes the form of an asset purchase or a share transfer. Where the transaction is a transfer of shares, the corporation and employer remains the same, even if the corporation has new owners. In the case of the sale of a business as a going concern, the employment with the former employer ends but is usually continued with the new employer. Each transaction brings about different consequences that each party will want to turn its mind to.

Another critical question is whether the vendor’s business has been certified by a trade union and whether the purchaser will be a “successor” under labour legislation. Where a vendor’s business is unionized, the purchaser of that business may well inherit the certification order, any collective bargaining agreements, labour relations board orders and proceedings, and any other obligations that the vendor had under the applicable labour legislation.