What happens to employees under an asset purchase agreement?

Employees are not assets you buy. Whether an asset purchase agreement mentions them or not, employment legislation decides what happens to their service when the business changes hands: provincial law for most businesses, federal law for federally regulated ones. Each province runs its own regime, so the two examples below show how the rules can differ. They are not a national rule.

Ontario

Under section 9 of the Employment Standards Act, 2000, if an employer sells a business or part of one and the purchaser employs an employee of the seller, the employment is deemed not to have been terminated or severed for the purposes of that Act. Ontario’s guide explains that these employees get credit for past employment. It also notes an exception if the employee is hired more than 13 weeks after the employee’s last day with the seller or the day of the sale, whichever is earlier. The Act’s definition of “sells” includes leases, transfers and other dispositions.

British Columbia

The Employment Standards Branch says the purchaser must treat employees as though their employment is continuous and undisturbed by the sale. If the seller does not terminate an employee before the date of disposition, employment continues with the new employer, and the purchaser is responsible for all outstanding wages, including those that fell due before the sale. When the seller terminates an employee before the sale, outstanding wages or compensation are the seller’s responsibility.

Federally regulated businesses

Under section 44 of the Canada Labour Code, where an employer sells a federal business, the person it is sold to is bound by any collective agreement that is applicable to the employees on the date of sale. Ask whether the business falls under federal rules at all.

Which employees you hire is a separate question. See whether a buyer can choose which employees to hire.