Your Employee Rights During a Sale of Business

When the ownership of a business changes, the future of the company and its employees may be uncertain. It’s important to understand your rights as an employee when there is a sale of business related to the company that employs you. This sale can have significant impacts on aspects such as terms of employment, seniority and even termination.

In this blog, we discuss your rights as an employee during a company ownership change in Ontario and what you may expect from your employer, and related employment.

Types of Sale of Business

There are two forms of a sale of business, each with their own employment implications for the employees within the business being sold.

When two parties enter into an agreement or contract regarding the sale of business, the type of sale decided on will dictate the employers’ obligations to the employees.

Share Purchase 

In this type of purchase, the business itself is not usually impacted. Here, the purchaser buys all of a company’s shares and essentially steps into the shoes of the pre-existing owner. All aspects of the company’s business are transferred, including the employees.

In a share purchase, typically the relationship between the current employer and the employees does not change. This means that the purchaser is responsible for any entitlements that the employees are owed upon termination. The employee’s employment continues under both the common law and the applicable employment standards legislation.

Asset Purchase

An asset purchase occurs when the purchase buys at least some of a company’s assets. The purchaser can select exactly what they would like to purchase from this company.

In an asset purchase, the purchaser to the sale is not obligated to hire the seller’s employees. If this is the type of sale, the seller must provide employees with notice pay or other compensation if the purchaser is not planning to hire the existing employees.

The purchaser can offer employment to any employee of the company, on any legal terms of employment. As mentioned, they are not required to do so.

Notice of Change

Employers in Ontario are required to provide written notice of any significant changes to the company’s ownership or structure. This notice must include:

• Information about the change
• Its expected impact on your employment
• The effective date of the change

The amount of notice you receive depends on the specific circumstances of the change and your employment contract.

Terms of Employment

Under Ontario’s Employment Standards Act (ESA) your terms and conditions of employment cannot be reduced or altered as a result of a company ownership change, or a sale of business. This means your new employer must continue to honor your existing employment contract, including your wages, benefits, and working conditions according to your original agreement. 

Employees are not required to accept any major changes a new owner or employer may try to implement upon a sale of business.

If an employee were to receive a fresh employment agreement from the purchaser and this agreement included alternative terms of employment, the employee may be able to refuse the contract and seek their termination entitlements.

Seniority

In a similar vein, in a share purchase, as a result of the nature of the sale, the purchaser of the company is required to uphold the seniority of it’s employees. 

An employee should review any new employment agreement from their new employer carefully in order to ensure that their length of service is recognized in the new agreement.

Termination

If your employment is terminated as a result of a company ownership change, you may be entitled to severance pay under the ESA. The amount of severance pay you receive depends on factors such as how long you have been employed with the company and the terms of your employment contract.

Generally speaking, the seller of the business must provide termination payments if their employees lose their jobs as a result of the sale of the business.

Benefits and Pension Plans

Your new employer must continue to provide any benefits and pension plans that your previous employer provided. If your new employer does not offer comparable benefits or pension plans, they may need to compensate you for the value of the benefits or pension plans you have lost.

Collective Agreements

If there is a collective agreement in place for your workplace, it will remain in effect after a change of ownership. All collective agreements are legally binding on both parties, meaning that once they are signed, they cannot be changed or terminated without mutual consent. If there is no collective agreement in place prior to the sale, then the new employer may negotiate one with its employees following the transfer of ownership.  

Union Representation

If you are represented by a union, then union representation must be maintained during any change of ownership even if the business is sold or transferred to another entity. During this process, unions may have certain rights such as access to payroll records or other documents related to employees’ terms and conditions of employment. Unions also have certain powers to represent employees during negotiations with the new owner regarding their rights and obligations under their existing collective agreement or any new one negotiated after transfer of ownership.    

Takeaway

It’s important for all Ontario employees to understand their rights. When their company goes through a change of ownership. The ESA protects employee rights by stating that all existing contracts remain valid unless otherwise noted in writing by both parties prior to transfer of ownership. 

Additionally, if there is a collective agreement in place prior to transfer it must persist afterward; however, if none exists before transfer then one may be negotiated between employer and employees following transfer. 

Lastly, union representation must always be maintained regardless of who owns the company now or before any changes take place. Understanding these key points ensures you know exactly what to expect should your company ever go through an ownership change. 

If you have questions in relation to ownership changes, or if you were subject to a recent termination of employment or otherwise, we encourage you to reach out to discuss your options. Please contact, Toronto employment lawyers, Sultan Lawyers, at 416-214-5111 or here.