Employees’ Rights in Case of a Transfer of Undertaking
Employees of the vendor who are not employed by the purchaser are entitled to, at minimum, notice of termination under the applicable employment standards legislation. However, if the employee is offered employment by the purchaser, employment will be deemed to be continuous for the purposes of employment standards legislation.
Requirements for Predecessor and Successor Parties
The liabilities of the vendor and purchaser depend on whether the transaction was a share purchase or an asset purchase. In a share purchase, the legal identity of the employer does not change, so there will be no change in the obligations and liabilities attached to the business. The purchaser will therefore acquire all obligations owed to employees, unless the parties have agreed otherwise under the agreement of purchase and sale.
In an asset purchase, the legal identity of the employer changes, such that the employment relationship will be severed. The vendor employer will be liable for any notice of termination payable to severed employees. However, if an employee of the vendor is employed by the purchaser, his or her employment will be deemed to be continuous for the purposes of employment standards legislation in most provinces.