Am I responsible for stock option or bonus promises the seller made?

Promised options and bonuses are set out in an employment contract, a plan or a grant letter, not in the employment standards statutes. The statutes do deal with what happens to employment when a business changes hands. Read them for what they say and no more. They are a starting point for questions to put to the seller, not an answer on who owes a particular award.

What the continuity rules say

In Ontario, s.9 of the Employment Standards Act, 2000 says that if an employer sells a business or part of one and the purchaser employs an employee of the seller, the employment is deemed not terminated or severed for the purposes of that Act. Under s.9(2), that 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. British Columbia’s s.97 and Alberta’s Employment Standards Code, s.5, deem employment continuous across a sale for the purposes of their own Acts. None of these texts says the buyer takes on every promise the seller made.

Bonuses and the definition of wages

The Ontario Act’s definition of wages leaves out sums paid as gifts or bonuses that depend on the employer’s discretion and are not related to hours, production or efficiency. A bonus of that kind is therefore not wages under the Act. A contract can still promise a bonus, and a promise with written conditions needs a lawyer’s reading of its terms. Ask for every bonus plan and any written promise to an individual.

Stock options

The employment statutes above do not address options. Ask for the plan, each grant letter and the cap table, then ask which company granted each option and whether you are buying that company or only its assets. If options are being cashed out in the sale, the tax question is separate, and the withholding answer covers it.

Put it in the agreement

Ask for a disclosure schedule listing every promised bonus, option and equity right, including verbal promises the seller admits to. Then settle in the purchase agreement who pays each one, whether the price adjusts, and whether the seller gives a representation and an indemnity. The representations and indemnities guide explains how those fit together.