What Happens to Employees When a Business Is Sold in BC?

If you work for a business that is being sold, the first worry is usually simple: will I still have a job, and will my years of service count? If you own the business, you want to know what you are handing over along with the shop, the clients and the equipment.

The answer depends partly on how the deal is structured. A sale of the company's shares and a sale of its assets work differently, and how the Employment Standards Act applies to each depends on the details of the deal, so it is worth confirming with a lawyer.

This article covers the law of British Columbia.

The basic rule: employment carries on

Under section 97 of the Employment Standards Act, if all or part of a business is disposed of, the employment of an employee is deemed continuous and uninterrupted by the disposition. The same applies if the business carries on under a receiver or receiver-manager.

In practical terms, a sale is not treated as the end of your job and the start of a new one. The buyer takes on the employer role and must honour your length of service with the seller.

Asset sale versus share sale

In an asset sale, the buyer purchases the business's assets, such as equipment, customer lists and goodwill, rather than the company itself. Section 97 applies here, so the buyer becomes your employer and your service counts from your original hire date.

In a share sale, the buyer purchases the owners' shares in the company. What changes is who owns and controls the company. How section 97 applies to a share sale depends on the details of the deal, so it is worth confirming with a lawyer before you assume anything either way.

Wages, vacation pay and termination

When employment continues through a sale, the buyer pays outstanding wages, including wages that were due before the sale, and takes on accrued vacation pay, which is payable when the employee next takes vacation. If employment ends before the sale, the seller pays all outstanding wages and compensation.

If the buyer later ends your employment, compensation for length of service is counted from your original hire date. Under the Act, that compensation is one week's wages after three consecutive months, two weeks after 12 months, and three weeks after three years plus one more week for each additional year, to a maximum of eight weeks. It can be met by written notice, pay in lieu of notice, or a combination of the two.

Exceptions that matter

• If an employee declines the buyer's offer and the conditions are not substantially changed, the employee is deemed to have quit, and no notice or compensation is owed.
• If the buyer's changes are substantial and adverse, the director may treat it as a termination under section 66, and the buyer would pay compensation.
• In a bankruptcy, a trustee's sale can end employees' rights under the Act, and the buyer is not liable for wages owed before the bankruptcy.
• In a receivership, employment is still deemed continuous.

Employment contracts, union agreements and common-law rights can add protections beyond the Act. Whether they do depends on your documents, so it is worth having them reviewed.

What to do next

• Employees: keep your contract, pay stubs, hire date and vacation records, and ask in writing who your employer will be after closing.
• Employees: read any new offer carefully before declining it, since refusing can mean you are treated as having quit.
• Owners: list every employee with hire dates, wages owing and accrued vacation, because these follow the business.
• Owners: decide early whether the deal will be an asset sale or a share sale, and have the purchase agreement address wages, vacation and termination costs.
• Both sides: talk to a lawyer before signing if the business is in financial trouble or a trustee or receiver is involved.

Frequently asked questions