Can hiring the seller’s employees be a condition of an asset purchase?

An asset purchase moves specific assets from the seller to the buyer. The people who worked with those assets are a separate question, and the purchase agreement is where the parties answer it. A hiring condition makes closing depend on the buyer hiring named employees, or on key people accepting the buyer’s offers. Either side can ask for one: a buyer to protect the team it is paying for, a seller to look after staff it leaves behind.

The employees are not parties to the clause

The buyer and the seller sign the purchase agreement. The employees do not, so a clause can require the buyer to make offers, or make closing depend on a key person accepting one, but it cannot make anyone take the job. A promise of “comparable” terms leaves room for argument, while naming the role, pay and start date leaves little. For contracts once people are hired, see do employees need new contracts after an asset sale.

What the law fixes whatever the clause says

Provincial employment standards apply whatever the agreement says. In British Columbia, if all or part of a business is disposed of, its employees’ employment is deemed continuous and uninterrupted. A buyer that later ends a transferred employee’s job owes compensation counted from the date the seller hired that person, while a seller that ends the job before the sale owes it. Quebec’s CNESST says the employment relationship is maintained when a company changes owner, as long as the new owner shows the operation continues.

Moving the payroll

A buyer that is a new employer needs its own payroll account for transferred staff, and the seller closes its own. The CRA says a new employer must register for a payroll program account before its first remittance is due. Before closing its own account, the seller must remit all source deductions, file final information returns and give former employees their T4 slips. Both sets of dates belong in the closing timetable.

What the clause should settle

• Which employees are covered, named or by class.
• The offer terms, stated specifically.
• When offers go out and when they must be accepted.
• Who bears termination costs if someone is not hired.