Buying a Business in Newfoundland and Labrador: Do Employees' Service Years Come With It?

Buying an existing business and starting from scratch are very different when it comes to people. A startup hires its own team. A purchase usually comes with staff who already have years of work behind them, and the law may treat those years as yours to honour.

This article explains how that works in Newfoundland and Labrador: how service carries over, what it means for notice if you later end someone's job, what changes in a unionized workplace, and what to ask about staff before you sign. It is general information, not advice on your deal.

This article covers the law of Newfoundland and Labrador.

Startup versus purchase: where the service clock starts

If you start a business, every employee you hire starts counting service on their own first day of work for you. There is no history to inherit.

If you buy a business as a going concern, the Labour Standards Act treats employment with the new owner as continuous with the period worked for the first employer when an undertaking is transferred, so past service counts toward entitlements under the Act, such as notice periods. The Act defines an undertaking to include a trade, industry, occupation or business carried on by an employer, which is why this applies to the sale of a business.

In practice, a long-serving cashier or technician does not become a new hire just because the ownership changed. How your purchase agreement is structured can matter, so it is worth confirming with a lawyer how the rule applies to your deal.

How service sets termination notice

An employer or employee must not end a contract of service unless written notice is given within the period the Act requires. The required period depends on continuous employment.

Because of the service-carryover rule, a buyer who ends a transferred employee's job counts the seller's years as well as their own. An employee with 6 years at the seller and 6 months with you has 6 years and 6 months of combined service, which is in the 5-to-under-10-year bracket, so 3 weeks' notice, not 1 week.

These are the Act's minimums. An employment contract or other legal rights may give more, so a lawyer can confirm what applies to a particular person.

Planning larger staff cuts after closing

Special rules apply to group terminations. An employer intending to end the jobs of 50 or more employees within a 4-week period must give written notice of 8 weeks for 50 to 199 employees, 12 weeks for 200 to 499, or 16 weeks for 500 or more.

This matters if you plan to downsize after closing. The timing of any cuts, and whether they are counted together, is something to plan with a lawyer before you commit to the purchase price.

Unionized workplaces and WorkplaceNL

If the business is unionized, the Labour Relations Act says that when an employer sells or otherwise disposes of its business or part of it, a collective agreement, certification or pending application covering the affected employees continues in force and binds the purchaser.

There is an exception. The rule applies unless the Labour Relations Board otherwise directs. The parties may apply to the Board, which can modify agreements, amend certifications, decide bargaining units or name the bargaining agent, and the purchaser need not bargain for the affected employees until the Board decides the application.

Separately, under the Workplace Health, Safety and Compensation Act, where a business with an unpaid assessment is sold or transferred, the commission may determine that a person is the successor of the employer and collect the unpaid assessment from that person. This power also reaches a business that has changed ownership, been reincorporated or restructured, or been dealt with in a way the commission considers intended to avoid obligations, so a share sale or restructuring does not by itself avoid it.

Staff questions to ask before you sign

• Who works in the business, and what is each person's start date with the seller?
• Which employees are covered by a collective agreement or certification, and is any application pending?
• Has the seller given or received any notice of termination, or promised anything in writing about pay, severance or vacation?
• Are there written employment contracts, and do they give more than the Act's minimums?
• Does the seller owe any WorkplaceNL assessments, and can the seller show they are paid?
• Do you plan to reduce staff after closing, and if so how many and over what period?
• Will the purchase agreement include the seller's promises about the accuracy of the staff list and an indemnity if it is wrong?

Collect the answers in writing and keep them with your closing documents. A lawyer can then help you decide whether to adjust the price, ask for a holdback, or change how the deal is structured.

Frequently asked questions