Employment standards when a business is sold — Ontario

Ontario’s rule for employees when a business is sold sits in section 9 of the Employment Standards Act, 2000. It is built from conditions and a time limit, and the Ministry of Labour’s guide to the Act treats it under the heading of continuity of employment. The rule does not move employees automatically and does not make a buyer hire anyone. This guide walks through what section 9 of the Employment Standards Act, 2000 says, how its 13-week window is counted, what it feeds into, and the separate rule for unionized workplaces. For the Canada-wide picture, see what happens to employees when you sell.

The two conditions in section 9(1)

Section 9(1) applies if an employer sells a business or a part of a business and the purchaser employs an employee of the seller. In that case the employee’s employment is deemed not to have been terminated or severed for the purposes of the Act, and the employment with the seller is deemed to be employment with the purchaser for any later calculation of the employee’s length or period of employment. Both conditions matter. The rule attaches to the employees the purchaser actually employs, and nothing in section 9 makes the purchaser hire anyone. The Ministry’s guide describes the purpose in the same terms: past employment is recognized when the business is sold and the employee continues to work for the new owner.

What counts as a sale, and a part of a business

Under section 9(3), “sells” includes leases, transfers or disposes of in any other manner, and “sale” has a corresponding meaning. So the rule is not limited to a purchase for cash. It also reaches part of a business. The Ministry’s guide gives examples of a garage that its owner sells to a son who chooses to keep an employee on, and of a dairy that sells its ice cream division, after which the total time an employee who accepts the buyer’s offer was employed by the business must be taken into account. Section 9(4) adds that employment with the seller includes employment attributed under section 9 or the corresponding rule of an earlier Act.

How the 13-week window is counted

Section 9(2) of the Employment Standards Act, 2000 says subsection (1) does not apply if the day on which the purchaser hires the employee is more than 13 weeks after the earlier of two dates: the employee’s last day of employment with the seller, and the day of the sale. The clock therefore does not simply run from closing. If an employee’s last day with the seller comes before closing, the window starts then. This is a period fixed by the Act itself. A buyer who plans to bring staff on after a gap, or after a transition period, should ask counsel to count the weeks from the right date for each person.

What the credited service feeds into

The Ministry’s guide lists the entitlements affected: vacations, pregnancy and parental leave, other leaves, notice of termination or termination pay, and severance pay. Some entitlements have a minimum time before they start, and others grow with length of employment, and credited service counts toward both. The Ministry of Labour’s guide gives the example of parental leave, which requires that a new parent have been employed by the employer for at least 13 weeks before the leave begins. The termination chapter of the Ministry of Labour’s guide says that in most cases an employee continuously employed for three months is entitled to written notice, termination pay or a combination, so the start date used after a sale can change what is owed on a later termination. That chapter of the Ministry of Labour’s guide also says that where two separate periods of employment are separated by more than 13 weeks, only the most recent period counts for notice of termination. In its vacation example, an employee with a long record with the seller does not restart the vacation entitlement clock when the buyer takes over.

The separate rule for unionized workplaces

Section 9 is not the only provision in play if the workforce is unionized. Under section 69 of the Labour Relations Act, 1995, “sells” includes leases, transfers and any other manner of disposition. Where an employer who is bound by or is a party to a collective agreement sells the business, the person to whom it is sold is, until the Labour Relations Board otherwise declares, bound by the agreement as if a party to it. Under section 69(3), a certified union continues, until the Board otherwise declares, as bargaining agent for the purchaser’s employees in the like bargaining unit, and under section 69(5) of the Labour Relations Act, 1995 the Board may, on an application made within 60 days after the purchaser becomes bound by the agreement or the union gives notice under section 69(3), terminate the union’s bargaining rights if in its opinion the purchaser has changed its character so that it is substantially different from the seller’s business.

• Get every employee’s start date and last day, because section 9(2) turns on them.
• Ask which employees the buyer will actually employ, since section 9(1) attaches only to those.
• Confirm whether the sale is of the whole business or a part, and how the agreement defines it.
• Ask whether any collective agreement or certification applies before relying on section 9 alone.