Can changing employees’ terms after I buy a business be constructive dismissal?

Buying a business does not wipe the slate clean for the staff who come with it. Ontario, British Columbia and Alberta each have a rule that carries employment across a sale, so a buyer who changes pay, duties or hours is changing terms of an employment the law may treat as continuing. Whether a particular change amounts to constructive dismissal is a legal question about the change and the contract. An employment lawyer should answer it before the change is made.

Ontario

Ontario’s Employment Standards Act, 2000 says an employer terminates employment for purposes of s. 54 if the employer constructively dismisses the employee and the employee resigns in response within a reasonable period (s. 56(1)(b)). Where an employer sells a business or part of one and the purchaser employs an employee of the seller, s. 9(1) deems the employment not terminated or severed for the purposes of the Act and counts the seller’s time toward later length of employment. 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 and Alberta

British Columbia’s Employment Standards Act s. 97 deems employment continuous and uninterrupted, for the purposes of that Act, when all or part of a business is disposed of. The Employment Standards Branch’s interpretation says employees who choose not to work for the purchaser, where their conditions of employment have not substantially been changed as a result of the sale, are deemed to have quit. That passage turns on whether conditions were substantially changed, so a buyer planning changes should take advice first. 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.

Before you change anything

Check what the purchase agreement says about employees, and whether new written terms will be offered. Ask a lawyer in the province before changing pay, hours, duties, location or reporting lines for anyone who stays. Other provinces have their own rules, so do not assume these three apply. Our guide on whether you need a lawyer covers where that help fits in a purchase.