Matching Job Offers to Keep an Employee From Suing Both Sides

The situation

Liang and his spouse Wei had built a small but well-regarded engineering consulting practice in Parry Sound over close to twenty years, incorporated as a professional corporation. The practice did site assessments and project oversight work for construction and municipal clients across the region. After a buyer approached them with an offer in the low millions, Liang and Wei decided it was time to sell and retire from active practice, though Liang planned to stay on for a transition period as a consultant.

The buyer, Tarek, ran a larger construction services group looking to add engineering capacity in the North. He wanted the practice's client contracts, equipment, office lease and two key staff members: a sales director who managed client relationships and business development, and a construction project manager who ran field oversight on active projects. He did not want the corporation itself, with its accumulated liabilities and history. The deal was structured as an asset purchase, meaning Tarek's company would buy specific assets and contracts out of Liang's corporation rather than buying the shares of the corporation.

That structural choice, ordinary as it sounds, created the entire employment problem that followed.

The legal problem

In a share purchase, the corporation itself changes owners but keeps existing as the employer, so employees' jobs continue without interruption. In an asset purchase, the selling corporation legally remains the employer of record until closing, and any employees who move to the buyer are, in the eyes of employment law, terminated by the seller and hired fresh by the buyer. That termination triggers obligations under the Employment Standards Act, 2000 and, for longer-service employees, common law notice obligations that go well beyond the statutory minimums.

There is a well-known way around this. If the buyer offers the employee substantially the same job, on substantially the same terms, without an interruption in employment, the employee's service is treated as continuous for statutory purposes and the seller avoids triggering termination pay. But 'substantially the same' is doing a lot of work in that sentence. If the buyer's offer meaningfully cuts pay, changes the role, or imposes a materially different location or reporting structure, the employee can treat the change as a constructive dismissal, meaning the employer effectively ended the employment relationship by unilaterally changing its fundamental terms, even though no one used the word 'termination.'

Our team was retained to review the purchase agreement and the draft offers of employment before the deal closed, specifically to assess this exposure. The sales director's offer from Tarek's company matched Liang's terms closely: same base compensation, same title, same client portfolio, same office. That offer was low risk and moved forward without issue.

The construction project manager's offer was a different story. Tarek's company already had its own project managers running larger sites out of a location roughly ninety minutes away, and the draft offer proposed folding this employee into that team, at a base salary about twelve percent lower than what he currently earned, with the expectation that he would work primarily out of the more distant office. On paper it was still a project manager role. In substance, it was a pay cut plus a significantly longer commute, and either change on its own could support a claim that the new job was not the same job.

What we did

1. Flagged the exposure before the offers went out. We reviewed both draft offers of employment against the employees' current terms line by line, comparing compensation, title, duties, reporting relationship and location. The sales director's offer passed. The project manager's offer did not, and we told Liang and Tarek's counsel that in writing before either offer reached the employee, rather than waiting to see how he reacted.
2. Explained the shared exposure to both sides. A common misconception in these deals is that once the buyer makes an offer, the seller's risk ends. It does not automatically. If the buyer's offer amounts to a constructive dismissal, the employee's claim can still reach back to the seller, since the seller was the actual employer until closing and the termination clock only stops running if a genuinely comparable offer was made. We walked Liang through this so the decision to push back on the offer was an informed one, not just caution for its own sake.
3. Negotiated specific changes to the offer, not just a general objection. Rather than simply telling Tarek's company the offer was risky, we proposed concrete fixes: match the current base salary, keep the employee's home office as his primary work location with travel to the other site only as needed, and preserve his existing title and reporting line for at least a defined transition period. Tarek's side was willing to move on salary and title but was firm that the role needed to sit within their existing project team structure, which meant some travel requirement was not negotiable from their perspective.
4. Built an indemnity into the purchase agreement. Because the parties could not close the gap entirely before the deal needed to sign, we negotiated a clause allocating responsibility if the employee later brought a claim tied to the mismatch between his old role and the new one. The purchase price included a holdback, an amount held back from the sale proceeds for a set period, specifically earmarked to cover this risk rather than being folded into general warranty protection.
5. Advised the employee be told directly, before closing, what the new terms would be. We recommended against letting the employee learn about the location change only after starting the new job. Tarek's company met with him roughly two weeks before closing, presented the revised offer with matched salary and title, and was transparent about the travel expectation, including offering a car allowance to offset it.

The outcome

The employee accepted the revised offer, but not without pushing back hard on the travel requirement, and not without raising, through his own counsel, the possibility that the arrangement still amounted to a substantial change to his job. That gave both sides genuine leverage against each other in the final week before closing.

The deal closed on a compromise. The employee took the role with matched salary, matched title, and the car allowance, along with a written acknowledgment of the reduced hours he would need to spend at the distant site compared to what the offer had originally proposed. In exchange for accepting the location change, he negotiated a signing bonus paid directly by Tarek's company, funded in part by a modest reduction to the purchase price Tarek paid Liang, since Tarek treated the added compensation as a cost of the deal he wanted reflected in the price. The holdback stayed in place for a period after closing in case the employee changed his mind and brought a claim anyway, but it was never called on.

Liang closed the sale roughly on schedule, at a price a little below the original number due to the price adjustment tied to the employee issue, but without the deal collapsing or dragging into a dispute after the fact. Wei, as co-shareholder, signed off on the reduced price once it was clear the alternative was an open-ended employment claim sitting against the corporation after closing. Tarek got the project manager he wanted, on terms his own team could live with operationally, and avoided inheriting a claim he had no visibility into before the deal review caught it.

Nobody involved would call this a clean win. The sales director's transition, by contrast, went smoothly precisely because nothing needed to be negotiated. The project manager's situation is closer to what these deals actually look like in practice: a real mismatch, caught early enough to fix, resolved through concessions from everyone rather than a clear victory for one side.

What you can learn from this