- Under section 9 of Ontario's Employment Standards Act, an employee the buyer keeps on is treated as continuously employed, with the seller's time counted for later length-of-service calculations.
- Carried-over service counts for vacation, notice, termination pay, severance pay and leave eligibility.
- Service does not carry over if the buyer rehires the person more than 13 weeks after the earlier of their last day with the seller or the day of the sale.
If you work for a business that has just been sold, one of your first questions is likely whether your years of service disappear. If you are the buyer, you may be wondering whether you have just taken on every employee's history.
Ontario's Employment Standards Act (the ESA) has a specific rule for this. It protects length of service, but it has limits, and it does not decide everything about the employment relationship. This article walks through how it works in plain terms.
What section 9 of the ESA says
Under ESA section 9(1), if an employer sells a business or part of a business and the purchaser employs one of the seller's employees, the employment is deemed not to have been terminated or severed for the purposes of the Act. The employee's time with the seller is then treated as time with the purchaser for any later calculation of length of employment.
Ontario's ESA guide describes the same idea: prior service flows through to the new owner when the business is sold or transferred and the employee keeps working in it, and the employee gets credit for past employment for every right based on length of employment.
What carries over to the new owner
Because the credit applies to every right tied to length of employment, it reaches several areas of everyday working life. The table shows the main ones.
| Area | How seller service is treated |
|---|---|
| Vacation | Combined service counts. Five or more years of combined service means three weeks' vacation and 6% vacation pay; under five years means two weeks and 4%. |
| Notice, termination pay and severance pay | Based on total service with the seller and the purchaser combined. |
| Leaves | Parental leave needs at least 13 weeks of employment, and some other child-related leaves need six consecutive months; prior service with the seller may be included. |
For example, an employee does not need to work another five years for the new owner to reach the longer vacation entitlement. A 10-year employee whose service is attributed to the new owner gets the maximum notice period.
When service does not carry over
There are limits. Prior service does not carry over if the employee is rehired by the purchaser more than 13 weeks after the earlier of the last day with the seller or the day of the sale.
A buyer is also not required under the ESA to hire the seller's employees, and an employee is under no obligation under the ESA to accept employment with the purchaser. Refusing does not reduce notice or severance entitlements. Employees the purchaser does not hire within 13 weeks are the seller's responsibility, which means the seller must give ESA notice or pay in lieu, and severance pay where it applies.
Section 9 also deems continuity only for the purposes of the Act. It does not bind the purchaser to the old employment contract and does not require the same terms. At common law, when a sale changes the employer's legal identity, the original contract ends, and if the employee accepts the new employer's offer a new contract arises. So your pay, duties and written terms depend on what the new employer offers, even though your ESA service credit carries over.
Does it matter if the deal is called an asset sale?
Not by itself. Section 9 treats "sells" as including leasing, transferring or disposing of a business in any other way. The Ministry looks at the substance of the deal, so calling it an asset sale does not stop section 9 applying if a business or part of one was in fact sold. Indicators include non-compete covenants, use of the trade name and transfer of customer lists.
Buyers sometimes try to avoid continuity in other ways. It cannot be avoided by offering new terms, running a selection process, or having the employee sign an acknowledgment that seniority is not carried forward. If the purchaser knowingly lets employees keep working after the sale, that can amount to employment by the purchaser.
Vacation pay at the changeover
Vacation pay that was accrued and due before the sale stays with the seller, while vacation pay accrued but only due after the sale passes to the purchaser. If you are an employee, check your final pay statement from the seller and your first one from the buyer to see that this has been handled.
What to do next
- Employees: keep your pay stubs, your offer letter and any letter about the sale, and note your original start date.
- Employees: do not assume that signing a form saying your seniority resets removes your ESA rights, and ask a lawyer before you sign one.
- Buyers: ask the seller for each employee's start date, vacation balance and pay history before closing.
- Buyers: decide who you will hire and when, keeping the 13-week window in mind.
- Both sides: have the purchase agreement say how employee costs are handled, and get legal advice on the wording.
Every sale is different, so a lawyer can confirm how the rules apply to your facts.
Frequently asked questions
Does my vacation entitlement reset when my employer sells the business?
Not if you keep working in the business for the buyer. Carried-over service counts, so five or more years of combined service gives three weeks' vacation and 6% vacation pay. You do not need to work another five years for the new owner.
What if the buyer hires me back months after the sale?
Service does not carry over if you are rehired more than 13 weeks after the earlier of your last day with the seller or the day of the sale. Within that window, continuity can apply.
Can I sign something saying my seniority does not carry forward?
Continuity cannot be avoided by having the employee sign an acknowledgment that seniority is not carried forward. Get advice before signing anything that reduces your rights.
Does the buyer have to keep the same pay and job?
The ESA does not require the same terms, and it does not bind the purchaser to the old contract. What you are offered is a separate question from whether your service is credited.
Sources
- Court of Appeal for Ontario, Krishnamoorthy v. Olympus Canada Inc., 2017 ONCA 873 (quoting ESA s. 9(1)) — ontariocourts.ca
- Your guide to the Employment Standards Act – Continuity of employment — ontario.ca
- ESA Policy and Interpretation Manual – Part IV Continuity of employment — ontario.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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