Employment standards when a business is sold — the Northwest Territories

The Northwest Territories deals with a business sale in its Employment Standards Act through one short rule, section 5, and other parts of the Act then count service in a way that rule affects. The Government of the Northwest Territories describes the Act and the Employment Standards Regulations as the basic legal authority that sets out minimum employment standards and allows Employment Standards staff to enforce them. This guide sets out what section 5 says, which entitlements depend on time with an employer, and which workplaces fall outside the Act. It describes the law as the sources state it. It does not say whether a sale should go ahead or how it should be structured.

What section 5 says

Section 5 provides that, for the purposes of the Act, the employment of an employee with a business, undertaking or other activity is deemed to be continuous and uninterrupted when the 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. Read closely, it is a rule about how time is counted. It does not say in so many words that a buyer must offer anyone a job or keep any particular terms. Whether staff move across, and on what terms, is a matter for the purchase agreement and the employment contracts, so ask a lawyer how section 5 applies to the way the deal is structured.

The counts that depend on time with an employer

Several entitlements in the Act turn on length of employment. The Northwest Territories Employment Standards Act defines a year of employment as a period of 12 months of continuous employment by one employer, starting on the date the employment began and renewing on each anniversary. Vacation pay under section 25 is set by years of employment with the employer. Under section 37(1) of the Employment Standards Act, an employer may not terminate an employee employed for 90 days or more unless it gives written notice or pays termination pay, subject to the exceptions in section 37(2) (for example just cause or a temporary lay-off), and under section 38(2) the notice period is at least two weeks plus one additional week for each year of employment over two years, to a maximum of eight weeks. Section 38(4) of the Employment Standards Act adds that if an employee has been employed by the same employer more than once, the separate periods are deemed one period for the notice calculation if not more than 90 days have elapsed between each. That rule concerns the same employer, so ask counsel which provision governs a gap between closing and a new start. Because section 5 applies for the purposes of the Act, also ask how it feeds each of these counts.

Service periods set by the Regulations

The Employment Standards Regulations set the service an employee needs before some leaves. Under sections 11 and 12 of the Employment Standards Regulations, an employee must be employed by the employer for at least 12 consecutive months before the relevant day to be entitled to pregnancy leave or parental leave. Section 12.01 of the Employment Standards Regulations requires at least six consecutive months for family caregiver leave. Section 12.1 sets one period for unpaid family violence leave and a longer one for paid leave. After a sale, the practical question is whether an employee’s time with the seller counts toward those periods. Put that question to counsel, and ask them to answer it from section 5 and the Regulations themselves.

Workplaces the Act does not cover

The Government of the Northwest Territories says the Act applies to most employees and employers that perform work in the territory, but not to federal government employees, territorial government employees, or workers in federally regulated industries such as airlines, banks and most telecommunications operations. A federally regulated business falls under federal labour law, including the Canada Labour Code. Section 44(2) of the Code deals with the sale of a business in the industrial-relations setting: the union that is the bargaining agent for the employees continues as their bargaining agent, and the person to whom the business is sold is bound by any collective agreement applicable to the employees on the date of the sale. That is a different rule from section 5, with a different source.

What to ask before closing

The Employment Standards Office provides information on the Act, and its staff enforce it, so a buyer or seller can contact it with questions. For the sale itself, these are worth putting to the other side and to counsel.

• Ask the seller for each employee’s start date, since the year-of-employment, vacation and notice counts all run from it.
• Ask whether any employee has a complaint, order or unpaid amount outstanding with the Employment Standards Office.
• Ask which employees are on or about to start a leave, and how long each has been employed.
• Ask whether the seller has given or planned any group termination notice, which the Government says the Act requires to go to the Employment Standards Officer and any applicable union.
• Confirm whether the business is under the territorial Act or a federally regulated industry.