Do employees need new contracts after an asset sale?

This is one of the clearest differences between the two deal structures, and one of the most commonly missed. Buyers used to thinking of an acquisition as simply taking over a business are sometimes surprised that employment does not just follow the assets.

Why the contract does not transfer on its own

An asset purchase agreement moves specific assets and, usually, specific liabilities — inventory, equipment, contracts the buyer chooses to assume, goodwill. Employment contracts are personal to the employer named in them, and the seller remains that employer unless the contract is validly assigned with the employee’s consent or, more commonly, the buyer simply offers a new one.

What the new offer needs to address

• Start date, role, pay and location, stated clearly rather than assumed to match the old job
• Whether the offer recognizes the employee’s length of service with the seller, which affects future entitlements
• Whether existing benefits, vacation accrual and any bonus arrangements continue or reset
• Any restrictive covenants the buyer wants going forward, which cannot simply be copied from the old contract

Why “recognized service” is the clause that matters most

Most provincial employment standards deem service continuous for certain purposes when a buyer hires a seller’s employees to keep operating substantially the same business, regardless of what the new contract says. But common-law entitlements and internal policies are not automatically bound by that deeming rule, so the offer letter should say explicitly whether the buyer is recognizing prior service beyond what the law requires — silence here creates exactly the kind of ambiguity that ends up in a dispute.

Timing matters as much as content

Employees need a real opportunity to review and accept the new terms before their old job ends, not a document handed over at the closing dinner. A rushed offer with no time to consider it undermines the argument that the person freely accepted new terms.