What happens to my employees when I sell the business?

Share sale: employment continues automatically

When you sell shares, the corporation that employs your staff is the same the day after closing, so nothing about their employment changes automatically: contracts, service dates, vacation and any benefit plan carry on. You do not need to terminate anyone or issue new offers. The trade-off is that every past promise and unpaid entitlement travels with the shares, which is why buyers ask for detailed employment warranties and often a holdback in a share deal.

Asset sale: you remain the employer until closing

In an asset sale you are the employer up to closing. The buyer decides which employees to offer jobs to, and under s. 9 of the Employment Standards Act, 2000 anyone hired within thirteen weeks of the sale carries their service with you into the new employment for the purposes of the Act. Anyone the buyer does not hire remains your employee, and you owe them notice or pay in lieu under s. 57, severance pay under s. 64 if the tests are met, and any common-law notice their contract does not validly limit.

The severance calculator below shows the scale of the Act's minimums for a given length of service.

Negotiating who bears the cost

The purchase agreement should say plainly who pays for employees not hired: usually you, as the terminating employer, though buyers sometimes negotiate a shared cost where keeping goodwill with departing staff matters to the transition. Warranty language that all amounts owed to employees are paid to closing, backed by an indemnity, is standard; make sure the number behind that warranty is actually accurate before you sign it.

If fifty or more employees are terminated within a four-week period, the mass termination rules in s. 58 of the Act bring extra notice obligations into play.

Records of employment and unionized staff

For anyone not continuing with the buyer, issue a record of employment promptly and confirm final pay, including accrued vacation, is settled before or at closing. If any employees are unionized, s. 69 of the Labour Relations Act, 1995 binds a buyer as successor employer to the existing collective agreement, in both an asset and a share sale, so the union does not need to be part of your negotiation on this point.

Ask that your WSIB account be reviewed before closing; a clearance certificate reassures the buyer and confirms your own standing is current.

We draft the employment warranty and indemnity language in the purchase agreement, so the numbers you stand behind are the ones that actually protect you.