Employees and Sale of Business

If you buy a business and continue the employment of some of those who worked for the Seller, then, you have taken them over with their outstanding employment history.

For example, if someone worked for the Seller for 10 years, and now they work for you, and you fire them after one week, you have to pay them 6 months severance. Why? Because they are now deemed to have 10 years of employment with you!

You are OK, if there is a 13 week gap in employment. As part of every agreement, you want to make sure that the Seller terminates their own employees.

Here’s the provision in the Employment Standards Act:

Sale, etc., of business

(1) If an employer sells a business or a part of a business and the purchaser employs an employee of the seller, the employment of the employee shall be deemed not to have been terminated or severed for the purposes of this Act and his or her employment with the seller shall be deemed to have been employment with the purchaser for the purpose of any subsequent calculation of the employee’s length or period of employment.”

You should always secure proper advice and guidance when buying or selling a business.

Brian Madigan LL.B., Broker


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