Share Deal vs. Asset Deal: What Happens to Employees in an Ontario Business Sale

Whether employees keep their jobs, keep their seniority, and keep the same legal protections after a business sale depends heavily on one structural decision: is the deal a share deal or asset deal? The two structures treat employment relationships in fundamentally different ways, and conflating them is one of the more consequential mistakes a buyer or seller can make.

Get this wrong and you can end up with unexpected obligations to employees you assumed you had no relationship with, or the mistaken belief that a "clean" asset purchase means a clean slate on the workforce. It usually isn’t that simple.

The Core Difference: Does the Employer Actually Change?

In a share sale, the corporation itself changes ownership, but the corporation remains the employer. Employees’ employment is not interrupted at all, because their legal employer never changed. There’s no new employer to trigger questions about continuity of service.

In an asset sale, the buyer purchases specific assets rather than the corporation. If the buyer then hires the seller’s employees, the buyer is a genuinely new employer, which is exactly where Ontario’s Employment Standards Act, 2000 continuity rules come into play.

Share Deals: Employment Continues Automatically

Because the employer entity doesn’t change in a share sale, there’s no legal question about whether service is "continuous" — it simply continues, since employees remain employed by the same corporate employer throughout. This is one reason many sellers prefer a share sale: it avoids reopening employment questions that an asset sale can trigger.

Asset Deals: The Buyer Chooses, But ESA Continuity Can Still Apply

A purchaser in an asset sale has no statutory obligation under the Employment Standards Act, 2000 to hire any of the seller’s employees. But if the purchaser does hire them as part of buying the business, or part of the business, as a going concern, section 9 of the Act generally deems the employment not to have been terminated, meaning the employee’s prior service with the seller counts toward their statutory entitlements, like vacation and notice, with the new employer.

There’s an important limit: this continuity 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. Wait too long to make an offer, and the statutory bridge can be lost.

Common-Law Notice Is a Separate Question

ESA continuity is a statutory-minimum concept. At common law, a business 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 ESA minimums carry over. This is a nuanced area that depends on how the offer of employment is structured — get it wrong, and a purchaser can face more exposure than expected, or a seller can leave an employee under-protected.

Non-Compete Agreements With Departing Owners

Since October 25, 2021, general employee non-compete agreements have generally been prohibited under the Employment Standards Act, 2000. There are two recognized exceptions that matter in a business sale: a seller who becomes an employee of the purchaser as part of the sale, and defined executive roles. Outside those exceptions, for example a departing minority shareholder who isn’t becoming an employee, a non-compete may not be enforceable at all. Non-solicitation and confidentiality agreements are treated differently and generally remain enforceable subject to ordinary reasonableness limits.

A Practical Comparison

Frequently asked questions