A plain-language guide to what happens to your staff when you sell an Ontario business, in an asset sale and in a share sale.
⚖️ This is general information, not legal advice. It can't account for your specific situation. Use it to get oriented, then confirm the details with a licensed Ontario lawyer.
Selling a business raises immediate questions about the people who work in it: will they keep their jobs, who answers for notice or severance if they do not, and what changes on day one for those who stay. The answer depends heavily on whether the sale is structured as a sale of shares or a sale of assets. This guide sets out the difference, the continuity rules under the Employment Standards Act, 2000, and where the cost of termination usually lands in the purchase agreement.
Share sale: the employer does not change
- The corporation stays the employer; contracts, pay, vacation and benefits carry on unchanged
- No termination, new offers or notice obligations are triggered by the sale itself
- Every past promise and unpaid entitlement travels with the shares to the new owner
- Buyers manage that risk with employment warranties, an indemnity and often a holdback
Asset sale: the seller is the employer until closing
In an asset sale the seller remains the employer up to closing, and the buyer decides which employees to offer jobs to. Under section 9 of the Employment Standards Act, 2000, anyone the buyer hires within thirteen weeks of the earlier of their last day with the seller and the sale date carries their service with the seller into the new employment for the purposes of the Act.
That continuity affects notice, severance and vacation entitlements calculated under the Act. It does not automatically carry over common-law notice rights, though courts often recognize prior service there too when assessing what is reasonable.
Who pays for employees the buyer does not hire
Employees the buyer does not take on remain employed by the seller, who owes them notice or pay in lieu under section 57 of the Act, severance pay under section 64 where the length-of-service and payroll tests are met, and any common-law notice their contract does not validly limit. The purchase agreement should say plainly that this cost falls on the seller, and back it with a warranty and an indemnity for any pre-closing amounts owed.
Fifty or more terminations within a four-week period trigger the additional notice requirements in section 58 of the Act, which can affect the timing of a larger sale.
Practical steps for both sides
- Get an accurate employee list early: start dates, pay, benefits, contracts and any past terminations
- Decide the sale structure with continuity in mind, not only tax or price
- Draft any new offers to meet or exceed the Act and to recognize prior service
- Confirm a WSIB clearance certificate before closing
- Check whether a collective agreement binds the buyer as successor employer under the Labour Relations Act, 1995
What does not change with a union
If the workforce is unionized, section 69 of the Labour Relations Act, 1995 binds a buyer to the existing collective agreement as a successor employer, in both an asset sale and a share sale, until the Ontario Labour Relations Board declares otherwise. This is one of the few points where the sale's structure makes little practical difference.
How Treadstone Law can help
Employees are rarely the first thing sellers think about, but they are usually the fastest way a deal goes wrong if service dates, pay and past terminations are not accurately recorded before a buyer starts asking questions.
Treadstone Law handles corporate matters on a transparent flat fee, with online intake and a real lawyer on your file, across Ontario.
- Start your file online at treadstonelaw.ca/start-file
- See flat-fee pricing at treadstonelaw.ca/pricing
- Learn more about our corporate services at treadstonelaw.ca/corporate
- Or call us: 1-844-900-1070
This is not legal advice
This guide is general information, not legal advice. Reading it does not create a lawyer-client relationship. Ontario laws and government programs change, and how the law applies depends on your specific facts. For advice about your situation, speak with a licensed Ontario lawyer. Treadstone Law is licensed by the Law Society of Ontario — reach us at 1-844-900-1070 or start a file online.