Employment standards when a business is sold in British Columbia

British Columbia handles employees in a business sale through one short provision, section 97 of the Employment Standards Act, and a longer interpretive guide published by the Employment Standards Branch. The section says that if all or part of a business is disposed of, or the business continues to operate under a receiver or receiver-manager, the employment of an employee of the business is deemed, for the purposes of the Act, to be continuous and uninterrupted by the disposition or receivership. The Branch’s interpretation adds further detail, and it is a guide to how the Act is read rather than the Act itself. This page keeps the two apart. The Branch’s page was last updated on January 15, 2024, so check for a newer version before you rely on it. For the general picture, see what happens to employees when I sell my business.

“Disposed of” is wider than “sold”

The statute uses the word disposed of. The Branch notes that the Interpretation Act defines disposal as transfer by any method, including assign, give, sell, grant, charge, convey, bequeath, devise, lease, divest, release and agree to do any of those things. Its examples include a company selling one division, a franchise sold to another person who keeps operating in the same location with some or all of the earlier employees, and a restaurant that closes for a few days to redecorate under its new owner before calling staff back. The Branch states that section 97 applies in the first two of these examples.

Who was employed on the day of the disposition

The Branch says that to decide whether employment is continuous, you ask whether the employees were currently employed when the business was disposed of. If the seller terminated an employee before the sale, the Branch’s position is that any outstanding wages or compensation are the seller’s responsibility, and the employee cannot obtain them from the purchaser. If the seller did not, employment continues with the new employer. In that case the Branch says the purchaser is responsible for all outstanding wages, including those that fell due before the sale.

What the purchaser takes on, in the Branch’s words

The Branch’s guide says the purchaser must treat the employees as though their employment is continuous, is required to honour past service with the seller, and assumes the seller’s liabilities and obligations under the Act toward those employees. On vacation, it says that when employment is continuous the seller is not required to pay out vacation pay at the disposition. The purchasing employer assumes liability for accrued vacation pay, which becomes payable when employees take their next vacation. Compensation for length of service after a later termination is calculated from the original hire date. The same continuity applies to statutory holidays, where the Branch says entitlement is based on the days worked and wages earned for both the previous and the current employer.

Employees who decline, and changes to their terms

Under the Branch’s interpretation, employees who choose not to go to work for the purchaser, where their conditions of employment have not substantially changed, are deemed to have quit. Neither the seller nor the purchaser then owes written notice or compensation. The guide also warns that a substantial and adverse change to conditions may lead the director to determine that employment was terminated under section 66 of the Act, with the purchaser responsible for any compensation that follows. Review the terms you plan to offer with that warning in mind.

Receivership and bankruptcy are treated differently

The Branch says that when a business goes into receivership, employment is deemed continuous. If a trustee in bankruptcy sells the business and employees continue, it says their rights under the Act are extinguished, employment is deemed not continuous, and the purchaser of a bankrupt business is not liable for unpaid wages owed before the bankruptcy. A distressed sale can therefore produce a different result from an ordinary one. The Branch’s page also lists related sections to read alongside section 97, among them section 63 on liability resulting from length of service, section 64 on group terminations, section 87 on the lien for unpaid wages and section 96 on a corporate officer’s liability for unpaid wages.

WorkSafeBC and the Branch

Workers’ compensation is a separate system. WorkSafeBC advises contacting it before buying any assets from a firm, because if the seller owes unpaid insurance premiums the firm’s assets may be subject to a lien, and a clearance letter protects you against those liens. Disputes under the Employment Standards Act go to the Employment Standards Branch, which publishes the complaint process. A business within federal jurisdiction is under the Canada Labour Code instead, whose Part III covers standard hours, wages, vacations and holidays.

• Get a list of who was employed on the day of closing, and who the seller dismissed beforehand.
• Decide in writing who pays wages and vacation pay owing at closing, rather than relying on the Branch’s reading alone.
• Check whether any change you plan to the offered terms could be seen as a substantial and adverse change.
• Ask whether the business is in receivership or bankruptcy, since the Branch treats those cases separately.
• Request a WorkSafeBC clearance letter before closing an asset purchase.