- An asset sale, on its own, does not necessarily end anyone's employment.
- Section 9 of the ESA deems an employee's employment not to have been terminated where the purchaser hires them to continue a business sold as a going concern.
- Termination pay and severance pay are related but distinct ESA concepts, and severance pay in particular only applies once specific thresholds are met.
Not every employee comes along when a business changes hands in an asset sale — and when someone does not, that can be the moment their employment legally ends, with severance and termination obligations attached. Understanding when that trigger actually fires matters for both sides of the deal.
This article looks at when an Ontario asset sale results in a termination for severance purposes, who is generally responsible for it, and how the Employment Standards Act, 2000's continuity rules change the analysis.
Why an Asset Sale Isn't Automatically a "Termination"
An asset sale, on its own, does not necessarily end anyone's employment. If the buyer hires the seller's employees to keep the business running as a going concern, and does so within the statutory window discussed below, the Employment Standards Act, 2000 generally treats their employment as continuing, not as terminated and re-started.
When ESA Continuity Applies
Section 9 of the ESA deems an employee's employment not to have been terminated where the purchaser hires them to continue a business sold as a going concern. That continuity has a hard limit: it generally does not apply if the purchaser hires the employee more than 13 weeks after the earlier of the employee's last day with the seller or the date of the sale. Employees who fall outside that window, or who simply are not offered a job by the buyer at all, are in a different position — their employment with the seller has ended.
When Severance Pay Specifically Gets Triggered
Termination pay and severance pay are related but distinct ESA concepts, and severance pay in particular only applies once specific thresholds are met. As of mid-2026, an employee generally qualifies for statutory severance pay where they have five or more years of service and their employer has a global payroll of $2.5 million or more, or the employee is one of 50 or more employees severed within a six-month period due to a permanent business closure — figures change, so verify the current thresholds before relying on them.
| Condition | Detail |
|---|---|
| Length of service | 5+ years with the employer |
| Employer payroll size | $2.5 million or more, globally |
| Mass-closure alternative | 50+ employees severed within a 6-month period due to permanent closure |
An employee whose job ends because of an asset sale, and who does not fall within ESA continuity, is assessed against these same thresholds like any other terminated employee.
Who's on the Hook: Seller, Buyer, or Both?
If the buyer does not offer employment to a particular employee, that person's job with the seller is the one ending — and the seller, as the employer at the time, is generally the party responsible for statutory termination and severance obligations to that employee. Purchase agreements frequently address this directly, allocating costs between the parties or requiring the seller to deal with terminations before closing, but the starting legal position is that the party ending the employment relationship carries the obligation.
Where the buyer does hire an employee and ESA continuity applies, there is no termination to trigger severance in the first place — the clock simply keeps running, with the buyer standing in the seller's shoes for statutory purposes.
Common-Law Notice: A Separate, Often Bigger Risk
Statutory severance pay is a floor, not the whole picture. At common law, a longer-service employee whose job genuinely ends because of a business sale may be entitled to reasonable notice, or pay in lieu, well beyond the ESA statutory minimums. This exposure sits with whichever party actually terminated the employment, assessed on that employee's specific circumstances.
Practical Steps for Buyers and Sellers
- [ ] Decide, employee by employee, whether the buyer will offer continued employment
- [ ] Track the 13-week window carefully if any offers will be made after closing
- [ ] For any employee not being hired, assess statutory severance eligibility and common-law notice exposure before closing, not after
- [ ] Address responsibility for termination costs explicitly in the purchase agreement
- [ ] Don't assume "the buyer will handle it" without it being written down
Frequently asked questions
If the buyer hires almost all the employees, does severance still apply to the few who aren't hired?
Potentially, yes. Each employee's situation is assessed on its own facts, including their length of service and whether ESA continuity or a common-law notice claim applies to them specifically.
Can the purchase agreement shift severance responsibility to the buyer even if the seller technically ends the employment?
Buyer and seller can agree between themselves on cost allocation in the purchase agreement, but that is a contractual arrangement between the parties — it does not change what the terminated employee is legally owed or from whom they can pursue it as a matter of employment law.
Does severance pay apply to every small business sale?
No. The statutory thresholds mean many smaller employers simply do not meet the payroll-size test, so statutory severance pay specifically may not apply, though termination pay and common-law notice can still be relevant regardless of employer size.
What if we're not sure whether ESA continuity applies to a specific employee?
This is exactly the kind of fact-specific question — timing of the hire, nature of the business sold, whether it is a going concern — that benefits from a lawyer's review before you make representations to that employee or price the deal.
This is a business purchase or sale question
Start a file online — flat, published fees, reviewed by a licensed Ontario lawyer before a dollar is owed.