Employees when you buy a business in Nova Scotia

Two Nova Scotia statutes set the rules this page covers for the staff of a business a buyer acquires. The Labour Standards Code sets notice before a discharge, suspension or layoff and says what happens to length of service when a business changes hands. The Trade Union Act, a separate Act under which the Labour Board decides successor questions, deals with a union and its collective agreement when an employer sells. This page covers Nova Scotia only. For the national picture see what happens to employees when you sell, and for the wider purchase see buying a business in Nova Scotia.

Notice under section 72 of the Code

Start with the notice rule. Under section 72 of the Labour Standards Code, subject to subsection (3) and section 71, an employer may not discharge, suspend or lay off an employee without giving written notice, unless the employee has been guilty of wilful misconduct or disobedience or neglect of duty that the employer has not condoned. The notice is scaled to the employee’s period of employment, from at least one week for less than two years up to at least eight weeks for ten years or more. Subject to section 71, section 72(4) also lets an employer end employment at once by giving written notice and paying the regular pay for a normal, non-overtime work week for the notice period. Read the full table in the Code before you plan any staffing change after closing.

Who section 72 does not cover

Section 72(3) excludes several classes of person from the notice rule, among them a person whose period of employment is less than three months and a person employed for a definite term or task for a period not exceeding twelve months. Section 71 adds a separate protection: where an employee’s period of employment is ten years or more, the employer shall not discharge or suspend that employee without just cause, unless the employee falls within certain classes listed in section 72(3). Whether a particular employee is covered depends on the exact wording, so check each class against the Code rather than assuming.

What section 12 does to length of service

Section 12, headed transfer of business, is what ties the notice rules to a purchase. If an activity, business, trade or undertaking is disposed of, transferred or sold in any manner or amalgamated, whether by agreement, will, instrument, transfer, including transfer of shares, or by operation of law, the period of employment of an employee of that business at the time of the transfer is deemed to have been employment with the purchaser or transferee, and continuity is not broken. Because the section names a transfer of shares, a share purchase is covered in its own words, and the section also reaches a business disposed of, transferred or sold in any manner. The effect for the buyer is that the seller’s years of service can count toward the notice the buyer would owe.

Unionized employees and the Trade Union Act

Section 31 of the Trade Union Act applies where an employer sells, leases or transfers, or agrees to sell, lease or transfer, its business or operations or any part of either, and the employer or the purchaser, lessee or transferee is a party to or bound by a collective agreement with a bargaining agent for any affected employees, a bargaining agent has been certified or a trade union has applied to be certified for them, or a bargaining agent has given or is entitled to give notice under section 33 or 34. Unless the Labour Board otherwise directs, the agreement, certification, application, notice or entitlement continues in force and binds the purchaser, lessee or transferee. On an application under section 31(4), the Board may make orders that include modifying a collective agreement, determining bargaining units and, if more than one agreement continues, designating which employees each covers, so a buyer of a unionized business should find out early whether any application is before it.

Federally regulated businesses

Not every Nova Scotia business falls under these two Acts. Subject to exceptions elsewhere in it, section 4 of the Labour Standards Code applies the Code to matters within the province’s legislative jurisdiction, and lets the Governor in Council exempt named professions and classes of work by regulation. A federal work, undertaking or business is governed by the Canada Labour Code, whose Part I provides that where an employer sells a business, a trade union that is the bargaining agent for the employees employed in the business continues to be their bargaining agent. If you are unsure which regime your target falls under, settle that question first, because it decides which of the provisions above apply.

What to ask the seller for

The Nova Scotia rules depend on facts the seller holds. BDC’s due diligence guidance notes that you may need to meet key employees to learn about their role and whether they see themselves continuing at the company. Ask for these before closing:

• A list of employees with their start dates, because section 12 carries the seller’s service over to you.
• Any employment contracts, and any fixed-term or single-task arrangements that may fall outside section 72.
• Any certification, collective agreement or application before the Labour Board.
• A record of any discharge, suspension or layoff already given notice.
• Confirmation of whether the business is provincially or federally regulated.