What are my obligations if I terminate employees after buying a business?

Once a purchase closes, you are the employer of anyone who stays on, and ending their employment is governed by the employment standards law of the province where they work. The sale does not pause those rules or reset the clock.

Notice or termination pay

Ontario’s guide to the Employment Standards Act says that in most cases an employer ending the employment of someone who has been continuously employed for a qualifying period must give written notice of termination, termination pay, or a combination. Termination pay is a lump sum equal to the regular wages the employee would have earned in the notice period. The guide also says vacation cannot be scheduled during the notice period unless the employee agrees after receiving written notice.

How much service counts

The notice an employee is owed turns on length of service, and the seller’s years can be part of it. Ontario’s continuity rules credit an employee hired by the purchaser with time worked for the seller. British Columbia’s guideline says that when employees are terminated after a business is disposed of, the purchaser is responsible for compensation for length of service calculated from the date the seller hired them, plus other outstanding wages including vacation pay. Get each employee’s original start date from the seller’s records.

Many terminations at once

Ontario’s guide describes special rules for the amount of notice in a mass termination, where many employees at one establishment lose their jobs within a short period. A buyer planning to close a site or cut a shift should check those rules before settling the timing, and should check the equivalent rules in its own province, which may differ.

Severance pay and what the contract adds

Ontario’s guide states that its termination-of-employment rules are entirely separate from any entitlement to severance pay under the same Act. It also refers to entitlements that arise under an employment contract or a collective agreement. British Columbia’s guideline notes the purchaser may have recourse against the seller under the purchase contract, which is separate from its duties under the Act. A related question is covered in Can I lay off staff right after closing?