- There is no single rule that applies to every business purchase.
- In a share sale, the buyer purchases the shares of the corporation, and the corporation itself remains the employer throughout.
- In an asset sale, the buyer becomes a genuinely new employer for anyone it hires.
For an employee, "length of service" isn't just a number on a file — it can be the difference between a small notice entitlement and a substantial one down the road. For a buyer, understanding whether it must credit an employee's prior length of service with the seller is a real cost-planning question, not a technicality. The answer depends heavily on how the deal is structured and how the hire is timed.
This article walks through when a purchasing employer is required to recognize an employee's time with the seller, why the deal structure changes the answer entirely, and what buyers should check before assuming either way.
Short Answer: It Depends on Structure and Timing
There is no single rule that applies to every business purchase. A share sale and an asset sale produce very different answers, and within an asset sale, the specific timing of when an employee is hired can change the outcome for that individual employee.
Share Sales: Automatic, Always
In a share sale, the buyer purchases the shares of the corporation, and the corporation itself remains the employer throughout. There's no new employer for the law to reconcile, so length of service was never actually interrupted — it simply continues counting from the employee's original start date, regardless of who owns the shares.
Asset Sales: The Conditions That Trigger Credit
In an asset sale, the buyer becomes a genuinely new employer for anyone it hires. Ontario's Employment Standards Act, 2000 has a continuity-of-employment provision that can require crediting prior service, but only when its conditions are met:
- A business, or part of a business, is sold as a going concern — not just a disconnected purchase of individual assets.
- The purchaser employs the seller's employee to continue that work.
- The timing condition is satisfied — see below.
If all three line up, the employee's time with the seller counts as service with the purchaser for the Act's purposes.
The 13-Week Gap Rule, In Detail
The timing condition works like this: continuity generally does not apply if the purchaser hires the employee more than 13 weeks after the earlier of (a) the employee's last day of employment with the seller, or (b) the day of the sale. If the gap between leaving the seller and starting with the purchaser stretches beyond that window, the chain is broken, and the purchaser isn't required to credit that prior service under this provision.
This makes sequencing genuinely important on a real deal — how long employees go between their last paycheque from the seller and their first day with the buyer isn't just an HR detail, it can determine a legal outcome.
Why "Length of Service" Actually Matters
Crediting prior service isn't a symbolic gesture — it feeds directly into calculations like:
- Vacation entitlement and accrual.
- Eligibility for various statutory leaves tied to how long someone has worked.
- Notice-of-termination calculations if the employment later ends.
- Eligibility for statutory severance pay — which under the ESA generally depends on the employee having a number of years of service and the employer meeting a payroll-size (or mass-termination) threshold; as of mid-2026 those thresholds are meaningful but change over time, so confirm the current figures before relying on them.
A longer credited length of service, in other words, can translate directly into a larger future entitlement if that employment later ends — something a buyer should factor into its own risk planning, not just the employee's.
Decision Checklist for Buyers Structuring an Asset Deal
- [ ] Confirm whether the deal is genuinely an asset sale or a share sale before assuming continuity applies either way.
- [ ] Decide, before closing, exactly which employees are being offered continued employment.
- [ ] If there's any gap in employment, set a start date that falls inside the 13-week window.
- [ ] Document any service-recognition commitments clearly in the offer letter and the purchase agreement.
- [ ] Have counsel confirm that the "going concern" element of the sale is actually satisfied for your specific transaction — this isn't always obvious from the outside.
Frequently asked questions
If I leave the seller and get rehired by the new owner two months later, does my service count?
It depends on exactly when your last day with the seller was, when the sale closed, and when you actually started with the buyer — the 13-week window is measured from the earlier of the first two dates. A two-month gap could fall inside or outside that window depending on the specific dates.
Does length of service transfer for pension purposes too?
Not automatically. The statutory continuity rule is about ESA entitlements specifically. Pension and private benefit plans are separate arrangements that typically need to be addressed directly in the sale documents or a transition plan.
What if only part of the business is sold, not the whole thing?
The continuity provision can still apply to a sale of "a business or part of a business," so a partial sale doesn't automatically take an employee outside its scope — but it does make confirming the details more important.
Can the buyer and seller simply agree to recognize service even if the law wouldn't require it?
Yes. Nothing stops the parties from agreeing to more generous terms than the statutory minimum, and this is a genuinely common negotiating point — particularly for long-tenured employees the buyer wants to reassure and retain.
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