Yes — and the new contractor inherits it whether or not it ever priced the workforce as anything but a fresh hire.
Short answer
Canada Labour Code s.189(1.1) provides that where, “due to a contract being awarded through a retendering process, a second employer becomes responsible for carrying out” a federal work previously carried out by a first employer, an employee working in or in connection with it “is, for the purposes of this Division, deemed to be continuously employed with one employer.” No sale, transfer or contractual relationship between the two employers is required — the retendering itself is the event the subsection deems continuous.
Section 189(1.2) closes the deeming rule only where “the employee’s first day of employment by the second employer is more than 13 weeks after” the earlier of the employee’s last day with the first employer and the day the second employer takes over the work. Hiring within that window — the ordinary case on a retender, where the new contractor typically starts the day the old one stops — carries the employee’s full prior service forward, into notice scales that run to eight weeks at eight or more years of continuous employment and severance that runs uncapped at two days’ wages per completed year.
Two further subsections prevent the new contractor from being charged twice for the same period. Section 189(1.5) keeps the losing incumbent’s notice obligation from resetting only “if the first employer complied with that section” on notice; s.189(1.6) does the equivalent for severance if the first employer already paid it. A new contractor pricing a retender bid needs to model this inherited liability directly — treating a workforce as new hires when the Code measures continuous service, not hiring paperwork, understates the eventual termination cost invisibly until the day someone is actually let go.
The mechanic decided retendering that created continuity with no sale at all. For the two-clock, one-transaction version of the offsetting rule, see federal severance with no payroll test and no ceiling.
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