- In a share sale, nothing changes about who employs the staff, so there is nothing to re-paper.
- Unless the buyer takes a deliberate step to adopt or assign the seller's employment agreements — which is unusual in practice — an employee who continues working after an asset sale is…
- Section 9 of the Employment Standards Act, 2000 helps with one specific piece of this puzzle: where the buyer hires the seller's employees to continue a business sold as a going concern,…
Buyers in an Ontario asset purchase often assume that once the deal closes, employees who stay on will simply keep working under whatever contract they signed with the seller. That assumption is usually wrong — and acting on it can leave both the buyer and the employee unsure exactly what terms actually govern the job going forward.
Because an asset sale involves a new legal employer, new employment contracts after an asset sale are the norm, not an optional extra. This article explains why, what the Employment Standards Act, 2000 does and does not preserve automatically, and what a properly drafted new contract should cover.
Why the Question Comes Up in Every Asset Deal
In a share sale, nothing changes about who employs the staff, so there is nothing to re-paper. In an asset sale, the buyer is a different legal entity from the seller — and an employment contract is a personal agreement between an employee and a specific employer. The seller's old contract was made with the seller. It does not automatically become a contract with the buyer just because the buyer purchased the seller's assets.
The Legal Starting Point: A New Employer, Not an Automatic Transfer
Unless the buyer takes a deliberate step to adopt or assign the seller's employment agreements — which is unusual in practice — an employee who continues working after an asset sale is doing so under a new employment relationship with the buyer, whether or not anyone signs new paperwork on day one.
That is exactly the problem with leaving it unaddressed: if no new contract is signed, the terms of employment going forward can be genuinely unclear, and disputes tend to surface later, when they are harder and more expensive to resolve.
What ESA Continuity Preserves — and What It Doesn't
Section 9 of the Employment Standards Act, 2000 helps with one specific piece of this puzzle: where the buyer hires the seller's employees to continue a business sold as a going concern, generally within 13 weeks of the sale or the employee's last day with the seller, whichever is earlier, the employee's prior service with the seller counts toward statutory entitlements, such as vacation and notice, as if it had all been served with the buyer.
What it does not do is write the rest of the new employment contract for you. ESA continuity is about statutory minimums — it says nothing about salary, job title, benefits, bonus structure, hours, or restrictive covenants going forward. Those still need to be spelled out.
Should the Buyer Issue New Employment Agreements?
In almost every asset deal, yes. A new agreement gives both sides clarity and lets the buyer address:
- [ ] Whether the buyer is voluntarily recognizing prior service beyond what the ESA requires, for example for internal policies like additional vacation
- [ ] Current compensation, job title, and reporting structure
- [ ] Benefits and any waiting periods
- [ ] Confidentiality obligations going forward
- [ ] Non-solicitation terms, where appropriate
- [ ] Termination provisions that comply with the ESA
Non-Competes Need Extra Care
Since October 25, 2021, general non-compete agreements with employees have generally been prohibited under the Employment Standards Act, 2000. There are two recognized exceptions: a seller who becomes an employee of the purchaser as part of the business sale, and employees in defined executive roles. Outside those two situations, a new employment contract that tries to include a broad non-compete is likely unenforceable — non-solicitation and confidentiality provisions remain the more reliable tools for protecting the buyer's interests with ordinary employees.
What Happens If No New Contract Is Signed
Skipping this step does not make the issue go away — it just leaves the terms of the new employment relationship to be pieced together later from conduct, prior practice, and statutory minimums, which is a much weaker position for both sides than a clear written agreement. For the buyer specifically, unclear terms can also make it harder to enforce confidentiality or non-solicitation expectations that were never actually put in writing with the new employer.
Frequently asked questions
Can the buyer offer worse terms than the employee had with the seller?
The new contract cannot offer less than the Employment Standards Act, 2000 minimums, factoring in any continuity of service that applies. Beyond that statutory floor, compensation and other terms are open to negotiation, though offering materially worse terms can affect whether employees choose to accept the new role.
Do we need a new contract for every employee, or just new hires?
Every employee who continues working for the buyer after an asset sale is, legally, starting a new employment relationship — so the same reasoning applies across the board, not just to people the buyer is hiring for the first time.
What if an employee refuses to sign the new contract?
This is a fact-specific situation with real consequences for both sides and should be discussed with a lawyer before either party takes a firm position, particularly if ESA continuity of service is in play.
Is a simple offer letter enough, or do we need a full contract?
A short letter can work for straightforward situations, but it should still clearly address termination terms, compensation, and any restrictive covenants — the format matters less than making sure the key terms are actually covered.
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