Employees on Leave When You Sell Your Ontario Business

If someone on your team is on maternity, parental or medical leave, a sale of the business raises real questions. Will the buyer take them on? Do they keep their seniority and benefits? Can anyone treat them differently because they are away?

This article sets out the main Ontario ESA protections for these leaves, how a sale fits with them, and the human rights and workers' compensation points to keep in mind. Every situation is different, so use this as a starting point for a conversation with your lawyer.

How a sale treats employees, including those on leave

Under ESA s. 9, when a business is sold and the purchaser employs a seller's employee, the employee's length of employment with the seller is treated as employment with the purchaser. Continuity cannot be contracted out of or waived, and hiring on new terms or having employees sign a new contract does not avoid it.

In a share sale, the corporation remains the same employer, so employment simply continues. For an employee already on leave, that means the leave rights carry on with the same employer. In an asset sale, how s. 9 applies to a person who is on leave at closing depends on the facts and is worth confirming with a lawyer before the deal is signed.

The main leaves and their basic rules

Long-term illness leave has been in effect since June 19, 2025, is unpaid and job-protected, and requires a medical certificate from a qualified health practitioner stating a serious medical condition and the period off work. The employee need not have the certificate before starting the leave, but without it has no entitlement, must give a copy on the employer's request, and bears the cost. Employees on this leave have the same rights as those on pregnancy or parental leave.

Job protection, benefits and seniority

On return from pregnancy or parental leave, the employee generally gets the same job or, if it no longer exists, a comparable one, at no less than prior pay plus any raise they would have received. Length of employment, length of service and seniority credit continue to accrue during the leave. That matters in a sale, because notice, termination pay and severance are based on total combined service.

During pregnancy and parental leave the employer must keep paying its share of premiums for pension, life, accidental death, extended health and dental plans offered before the leave, unless the employee gives written notice they will not contribute. The employee normally keeps paying their own share. Employees on most ESA leaves keep the right to continue in these plans, though reservist leave is different and does not carry this right.

A buyer taking over should confirm that the plans in place can continue for people on leave, and sellers should disclose who is on leave and what premiums are being paid.

No penalties for taking leave

The ESA reprisal rule bars an employer from penalizing, threatening, demoting, suspending or firing an employee for taking or being eligible for an ESA leave. An employment standards officer can order reinstatement, compensation for loss caused by the violation, and any wages owing, including back wages and vacation pay for the period between dismissal and reinstatement.

An employer need not reinstate an employee dismissed for reasons totally unrelated to the leave. That is a narrow exception, and a sale-related restructuring that happens to hit people on leave invites scrutiny. Separately, dismissing or declining to hire someone because of a Human Rights Code ground such as disability, pregnancy or family status can be discrimination whatever the ESA says, and Code accommodation duties can go beyond the ESA leave.

• Do not choose who to keep or let go based on who is on leave.
• Document legitimate business reasons for any role changes.
• Treat employees on leave the same as others when sharing information about the sale.
• Keep medical details confidential and limited to what is needed.

Workers injured on the job

Where an employee is off because of a workplace injury, WSIB re-employment rules may apply. The injury employer must regularly employ 20 or more workers, and the worker must have been continuously employed at least one year before the injury. The duty lasts until the earliest of two years from injury, one year after the worker can do the pre-injury essential duties, or age 65.

On a sale, WSIB re-employment obligations generally attach to a successor employer that is the same legal entity as the injury employer, but generally do not attach if the successor is a different legal entity, such as an asset buyer. Even then, the ESA and human rights rules can still apply.

What to do next

• List every employee on leave, the type of leave, start date and expected return date.
• Gather the benefit plan documents and confirm premiums being paid during leave.
• Decide with your lawyer whether the deal is a share or asset sale and how that affects people on leave.
• Write down the business reasons for all staffing decisions.
• Ask your lawyer to review the disclosure and employee clauses in the sale agreement.

Frequently asked questions