Am I liable as a successor employer after an asset purchase?

Buying only a business’s assets leaves the seller’s corporation behind, which is why many buyers expect to start fresh as an employer. Employment standards law in several provinces is written to prevent that. When the business carries on, the employees’ service, and in some provinces unpaid entitlements, carry on with it. The glossary entry on the successor employer gives the short definition.

Ontario: service flows through to the purchaser

Ontario’s guide to the Employment Standards Act says a person’s length of employment with the seller is attributed to the purchaser when the purchaser hires the seller’s employee, so the employee does not start as new for these entitlements. The guide’s own example has the new owner liable for vacation pay the employee accrued in the last months with the seller.

British Columbia: the purchaser steps into the seller’s role

British Columbia’s interpretation guideline says the purchaser assumes the role of employer, must honour past service, and assumes all of the seller’s liabilities and obligations under the Act toward the employees. It adds that the purchaser may have recourse against the seller under the contract, but that this is separate from its obligations under the Act.

Quebec: shared liability for unsettled claims

The CNESST says that when a company changes owner, the employment relationship is maintained as though no change had occurred, provided the new owner shows the operation continues. Claims for amounts owed under the Act that were not settled before the change are not cancelled, and the former owner and the new owner are solidarily liable for them. The former owner is not liable for events after the sale.

What the purchase agreement can and cannot do

The contract can allocate cost between buyer and seller through an indemnity or a price adjustment, but it cannot change what the statute requires of you toward the employees. Other provinces have their own standards legislation, and unionized workplaces bring a separate regime that this page does not cover. For the wider picture, see What employment liabilities do I inherit when I buy a business?