Am I liable if the seller times a termination to dodge my cost?

Suppose a buyer learns that the seller ended an employee’s job shortly before closing. The question is whether the buyer now carries the cost. The answer comes from the employment-standards rule of the province, and from whether the buyer then employs the person. These rules deal with continuity of employment under the statute, not with whether a particular termination was handled properly.

Ontario: the purchaser must employ the person

Ontario’s ESA, s.9, applies where an employer sells a business or part of one and the purchaser employs an employee of the seller. Then the employment is deemed not to have been terminated or severed, and service with the seller counts. It does not apply if 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. A buyer that never employs the person is outside s.9, but a buyer that rehires someone the seller let go, inside that window, takes them with their service intact for the Act’s length-of-employment calculations.

British Columbia: timing decides

The BC Employment Standards Branch’s interpretation of s.97 says that when the seller terminates an employee before the sale, outstanding wages or compensation are the seller’s responsibility. It also says that if the seller does not terminate an employee before the date of disposition, employment continues with the new employer, and the purchaser is responsible for all outstanding wages, including those that fell due before the sale. In BC, then, a termination’s timing changes who answers for it.

Alberta: no seller-termination condition

Alberta’s Employment Standards Code, s.5, deems employment continuous and uninterrupted, for the purposes of the Code, when a business, undertaking or other activity or part of it is sold, leased, transferred or merged. The section sets out no condition about the seller ending the employment first. Do not assume Ontario’s 13-week rule applies there, and ask a lawyer how s.5 treats an employee the seller let go before the sale.

What a buyer can ask for

Ask the seller for a full employee list, any termination notices and what was paid, and ask whether any claim has been made. The purchase agreement can carry a representation on employees and an indemnity for liabilities the seller failed to disclose. A lawyer can tell you whether the employee’s service, notice or pay still raises a claim against the business you are buying.