Is employment continuous when a federally regulated business is sold?

Section 189 of the Canada Labour Code deals with employment when a work, undertaking or business, or any part of one, is leased or transferred from one employer to another by sale, merger or otherwise. Despite the transfer, the employment of an employee who works in or in connection with its operation is, before and after, deemed continuous with one employer for the purposes of the Division concerned. The rule has conditions and exceptions, set out below. This page covers the federal Code only.

When section 189(1) applies

The deemed continuity applies if the work, undertaking or business is a federal one, or becomes a federal one because of the lease or transfer. Employment and Social Development Canada (ESDC) says the Code regulates listed industries and workplaces, among them air transportation, banks, and radio and television broadcasting. Many Part III divisions say that section 189 applies for the purposes of that Division, so the deemed continuity reaches those parts of Part III and not every rule in the Code. Ask your lawyer which Division governs the entitlement in question.

The 13-week gap rule

Section 189(1.2) says the deemed continuity does not apply if the employee’s first day of employment by the second employer is more than 13 weeks after the earlier of two days: the employee’s last day of employment by the first employer, and the day the federal work, undertaking or business is transferred or the second employer first carries it out, as the case may be. Where the rule does apply, section 189(1.4) says any period between the employment by the first employer and the employment by the second employer is not included in the calculation of the period of continuous employment.

Notice and severance already given

Section 189(1.5) says that, for the employee’s employment by the second employer, section 189 does not apply to the calculation of an employee’s entitlement under section 230, which concerns notice of termination or wages in lieu, if the first employer complied with section 230 for that employment. Section 189(1.6) does the same for severance pay under section 235 if the first employer paid the employee severance pay for that employment. ESDC’s guidance says an employer that terminates an employee who has completed 12 consecutive months of continuous employment must also provide severance pay, except in the cases it lists, among them dismissal for just cause, and that a combination of notice and wages in lieu of notice is permitted. Confirm with a lawyer what the first employer gave or paid.

Union rights are a separate rule

Section 189 is not the Code’s rule on unions. Section 44, in Part I of the Code, deals separately with the sale of a business and a trade union that is the bargaining agent. For a share sale, compare employment on the purchase of a company’s shares. Provincial employment standards are separate again: ESDC directs anyone who does not work in a federally regulated industry to the employment standards of their province or territory of work.