Employment standards when a business is sold in Alberta

Alberta’s Employment Standards Code answers the question of what a sale does to an employee’s employment in a single sentence. Section 5 says that for the purposes of the Act, the employment of an employee is deemed to be continuous and uninterrupted when a business, undertaking or other activity, or part of it, is sold, leased, transferred or merged, or if it continues to operate under a receiver or receiver-manager. This guide explains what that wording covers, what it does not say, and which Alberta bodies deal with the related questions. It describes Alberta’s rule only. Other provinces word theirs differently. For the general picture, see what happens to employees when I sell my business.

What section 5 says

The section has two triggers. The first is a sale, lease, transfer or merger of a business, undertaking or other activity, or of part of one. The second is a business that keeps operating under a receiver or receiver-manager. When either happens, the Code treats the employee’s employment as one unbroken stretch for the purposes of the Act. The section has no time limit written into it and no condition that the seller must have ended anyone’s employment. It is also not a rule that the buyer must hire the existing staff. It speaks only to how employment is treated under the Code. The receiver wording is a separate trigger. It reaches a business that is still operating, even though no one has bought it.

The deal structure does not take a transaction outside it

Because the section lists a sale, a lease, a transfer and a merger, it is not tied to one way of papering a deal. A buyer who leases the operation and a buyer who buys the assets are both within its words. So is someone who buys only part of a business. Section 5 does not mention shares. In a share purchase the corporation that employs the staff stays the same, so ask counsel whether the section is even engaged and what the Code says about the employer’s existing obligations. Do not assume an answer from another province’s statute.

What “for the purposes of this Act” limits

Those opening words matter. Section 5 deems continuity for the Act. It does not say that the buyer takes on every obligation the seller had, and it does not say who owes wages that fell due before closing. Treat those as open questions for the purchase agreement and for advice. Section 4 adds a related point: an agreement that the Act, or a provision of it, does not apply, or that its remedies are not available to an employee, is against public policy and void. A clause in the sale contract cannot switch the Code off for the staff.

Why continuity changes the notice calculation

Continuity is relevant when someone is let go after closing. Under section 56, the written termination notice an employer must give grows with how long the employee has been employed by the employer, in steps set out in the Code. Because section 5 deems employment continuous for the purposes of the Act, ask counsel whether service with the seller counts toward that length. Section 54 deals with a different situation, an employee who has worked for the same employer more than once. Under section 54 of Alberta’s Employment Standards Code, for determining termination notice or termination pay, those periods are considered one period of employment if not more than 90 days has elapsed between them. Ask counsel how the two sections work together on your facts. Section 55 of the Employment Standards Code adds that an employer may end employment only by giving termination notice, termination pay in its place, or a combination of the two, and it lists cases where notice is not required, such as dismissal for just cause or employment of 90 days or less.

WCB-Alberta is a separate system

Workers’ compensation coverage sits outside the Employment Standards Code. WCB-Alberta’s page on when a clearance is needed lists “Sale of a business (section 132)” among its situations and says that you have a responsibility to get a clearance when buying a business, its stock or equipment. Ask the WCB how a clearance is requested for your transaction and what it will confirm about the seller’s account before closing.

Who administers the rules

The Government of Alberta’s employment standards page sets out the rights and obligations of employers and employees and the minimum standards employers must provide. It also explains how to file a complaint, and says the rules are enforced through audits, inspections, penalties, prosecutions and judgment collection. A business within federal jurisdiction is dealt with under the Canada Labour Code instead, whose Part III covers standard hours, wages, vacations and holidays.

• Identify whether the deal is a sale, lease, transfer or merger of the whole business or only part of it, and note which of those words section 5 uses.
• Ask counsel how section 5 applies if the purchase is of shares rather than assets.
• List each employee’s start date with the seller, because notice under section 56 is measured by how long the employee has been employed by the employer.
• Settle in writing who is responsible for wages and vacation pay that fell due before closing.
• Ask WCB-Alberta how a clearance is obtained for this purchase.