ESA Section 9 and Continuity of Employment on an Ontario Business Sale

Ontario's Employment Standards Act, 2000 contains a provision — commonly referred to as section 9 — that does a lot of quiet work whenever a business changes hands. It's the reason an employee whose corporate employer legally changed at closing can still walk into the new ownership with their years of service intact. Understanding exactly what it does, and what it doesn't do, matters to buyers, sellers, and employees alike.

This article breaks the provision down in plain language: what it deems to happen, the conditions that need to line up for it to apply, the timing limit that can cut it off, and the boundaries of what it actually covers.

What Section 9 Says, In Plain Language

Where an employer sells a business — or part of one — and the purchaser employs someone who worked for the seller, section 9 deems that employee's employment not to have been terminated or severed by the sale for purposes of the Employment Standards Act. Their prior service with the seller is then treated as service with the purchaser for calculating entitlements under the Act, such as vacation, various statutory leaves, notice of termination, and severance pay.

In other words, the law treats it as though the employment relationship simply continued, even though the legal employer has technically changed from the seller's corporation to the buyer's.

The Conditions That Have to Line Up

Section 9 doesn't apply to every business sale automatically. Broadly, it depends on:

1. A business, or part of a business, being sold — this is aimed at a going-concern transfer of an operation, not an isolated purchase of individual assets disconnected from an ongoing business.
2. The purchaser employing the seller's employee — the provision is triggered by the purchaser actually hiring the person to continue that work, not by the mere fact of the sale itself.
3. The timing condition being met — covered in detail below.

What Continuity Actually Means for the Employee

Once the conditions are met, the employee's history with the seller isn't wiped away by the change in corporate employer. That history keeps counting toward things like:

• Vacation entitlement and accrual.
• Eligibility for various statutory leaves tied to length of employment.
• Notice-of-termination calculations if the employment later ends with the purchaser.
• Eligibility for statutory severance pay, subject to the Act's own separate qualifying tests for severance.

The 13-Week Rule

There's a timing limit built into the provision: 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 too much time passes between leaving the seller and starting with the purchaser, the statutory bridge doesn't connect the two jobs.

This makes the sequencing of a deal — when employees are let go relative to when they're rehired — a genuinely important detail to get right, not just a formality.

What Section 9 Does Not Do

• It doesn't force a purchaser to hire anyone. There's no statutory obligation on a buyer in an asset sale to take on any of the seller's employees; the provision only applies to those the purchaser actually does hire.
• It doesn't apply to share sales at all. In a share sale, the corporate employer never changes, so there's no continuity gap to bridge in the first place — the concept simply doesn't arise.
• It generally doesn't stretch to a purchase of discrete, non-operating assets disconnected from an ongoing business, as opposed to a going-concern sale.
• It doesn't cap or replace common-law entitlements. Section 9 sets a statutory floor. At common law, a sale can still be treated as ending the employment relationship with the seller, and a purchaser doesn't automatically inherit the seller's common-law reasonable-notice exposure just because the ESA minimums carry over.

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