Am I liable if the seller misclassified an employee as a contractor?

The answer depends on how the deal is structured and where the business operates. A worker labelled a contractor but treated as an employee can leave unpaid statutory entitlements behind. Whether the buyer inherits that exposure turns on whether shares or assets are bought and on the province. This page explains the mechanisms; classification and any back liability are questions for an employment lawyer.

In a share purchase, the employer stays the same

When you buy shares, the corporation that used the worker is the same legal entity afterwards. Alberta’s government describes a corporation as an independent legal entity separate and apart from its owners, so whatever the corporation owes stays with it, and you now own the corporation. This is why classification matters most in a share deal.

In an asset purchase, the province matters

British Columbia’s Employment Standards Branch says a purchaser of a business must treat the employees’ employment as continuous, assumes the seller’s liabilities and obligations under the Act toward them, and is responsible for outstanding wages that fell due before the sale if the seller did not terminate the employee first. Section 9 of Ontario’s Employment Standards Act deems an employee’s employment with the seller to have been employment with the purchaser, for any later calculation of the employee’s length of employment, when the purchaser employs that employee, unless the purchaser hires the employee more than 13 weeks after the earlier of the employee’s last day with the seller and the day of the sale. Other provinces differ.

Why the label does not settle it

The protections above speak of employees, and a contract’s heading does not decide who is one. Ontario’s Employment Standards Act defines an employee as including a person who performs work for an employer for wages, and says an employer shall not treat an employee as if the person were not one. New Brunswick’s government says independent contractors are among those the provincial act does not cover, so the question is whether a worker is a genuine contractor.