A carrier running Windsor to Detroit and one running Windsor to London look identical: same yard, same trucks, same drivers. They sit in different legal systems — one under the Canada Labour Code, one under its province’s employment standards act. On a sale, section 189 is what decides which staff costs the buyer inherits.
Key takeaways
SECTION 01 OF 09
The marginal note on section 189 is Transfer. Subsection (1): “Despite the lease or transfer of a work, undertaking or business, or any part of a work, undertaking or business, from one employer to another employer by sale, merger or otherwise, the employment of the employee… is… deemed to be continuous with one employer” where the business is, or becomes on the transfer, a federal one.
Every operative word works. Despite — the transfer is irrelevant. Or any part of — you need not buy the whole company. By sale, merger or otherwise — an asset purchase escapes it no more than a share purchase. Deemed — a state of affairs the Code declares, not a presumption to argue about.
SECTION 02 OF 09
The section 2 definition is “any work, undertaking or business that is within the legislative authority of Parliament”, then a list including “a railway, canal, telegraph or other work or undertaking connecting any province with any other province, or extending beyond the limits of a province”.
The Labour Programme’s working list translates it: air transportation, banks, grain elevators, port services, postal and courier services, broadcasting, telecommunications, and “road transportation services, including trucks and buses, that cross provincial or international borders”.
The last entry catches people: “any business that is vital, essential or integral to the operation of one of the above activities”. Section 167 applies Part III to employment “in or in connection with the operation of” a federal undertaking — which reaches past the drivers to dispatch, the yard and the shop.
SECTION 03 OF 09
Nothing in the working week tells them. The carrier applies to its province for credentials, is inspected by provincial officers, files with a provincial authority. That looks provincial. But the Motor Vehicle Transport Act defines an “extra-provincial truck undertaking” as one “that connects a province with any other or others of the provinces or extends beyond the limits of a province”.
That Act hands administration back to the provinces. Section 7(1): “no person or body shall operate an extra-provincial motor carrier undertaking except under a safety fitness certificate issued by a provincial authority under this Act”. The certificate comes from the province; the power to issue it comes from a federal statute. The province licenses me, so the province governs my payroll is a reasonable inference from a misleading arrangement.
The test is the run, not the office. Toronto to Ottawa is provincial. Add one regular lane to Buffalo or Montreal and the same fleet, drivers and dispatcher are federal — and nothing is filed to mark the moment. The Labour Programme’s guideline on dual jurisdiction, written for the employment-equity programmes rather than labour standards, states the principle: “The nature of a business determines whether it is subject to federal or provincial labour laws.”
SECTION 04 OF 09
On its face the deeming works only “for the purposes of this Division”, and that Division is Division IV, Annual Vacations. Alone, a modest rule about vacation ladders.
It is not alone. Eight provisions import it in identical words: s. 201 for general holidays, s. 209.5 for maternity, parental and other protected leaves, s. 210(4) for bereavement leave, s. 234 for terminations, s. 237 for severance, s. 246(2) for unjust dismissal, s. 247.92 for reservist leave and s. 174(6) for banked overtime. Continuity is the spine of every length-of-service entitlement in Part III.
SECTION 05 OF 09
Section 184 sets vacation at “at least two weeks if they have completed at least one year of employment”, three at five consecutive years, four at ten. A driver with eleven years at the seller lands on the buyer’s payroll at four weeks.
Notice under subsection 230(1.1) runs the same clock: two weeks after three months, then a week per year to a maximum of eight. Severance under section 235 is separate and additional: after “twelve consecutive months of continuous employment”, the greater of “two days wages… in respect of each completed year” and five days. The Labour Programme confirms they stack.
The exposure with no price tag is section 240. A non-union employee with “12 consecutive months of continuous employment” may complain of unjust dismissal, and subsection 242(4) lets the Board order the employer to “reinstate the person in his employ”. Twenty long-service staff are twenty reinstatement risks.
SECTION 06 OF 09
The section carries its own limits, and they are the only ones. Subsection (1.2) switches the deeming off if “the employee’s first day of employment by the second employer is more than 13 weeks after” the earlier of their last day and the transfer date; (1.4) adds that a gap inside that window “is not included in the calculation”.
Subsection (1.5) removes termination notice “if the first employer complied with” section 230, and (1.6) does the same for severance “if the first employer paid them severance pay”. Both turn on the seller having actually done it; a covenant promising it is not compliance.
There is no consent exception and no waiver. Treadstone Law puts it exactly: an indemnity “reallocates cost between the buyer and seller. It doesn’t change what the employee is entitled to claim from their actual employer.”
SECTION 07 OF 09
Subsection 189(1.1) covers a transaction the parties would not call one. “If, due to a contract being awarded through a retendering process, a second employer becomes responsible for carrying out any particular federal work, undertaking or business, or part of one”, the employee who works on it before and after is “deemed to be continuously employed with one employer”. No assets, no shares, no agreement between the employers: win a terminal services contract from the incumbent, take on their people, and the service history comes too.
Paragraph 189(1)(b) then catches the business that “becomes a federal work, undertaking or business due to the lease or transfer”, and (1.3) settles what that does to past service: an employee’s “period of continuous employment… includes any period in which the work, undertaking or business… was not a federal work, undertaking or business.” Time earned under provincial standards counts toward federal entitlements.
The union side moves the same way. Subsection 44(3) provides that where a provincial business becomes subject to Part I or is sold to an employer who is, the provincial bargaining agent “continues to be their bargaining agent” and the collective agreement “is binding on… the person to whom the business is sold”.
SECTION 08 OF 09
Every province has a continuity rule on a sale, and the companion article on what happens to the staff when a business is sold covers the Ontario version. The differences here are structural.
One statute covers the country, so a carrier with terminals in four provinces runs one set of standards: federal labour standards “only apply to employees in federally regulated businesses and industries”, and the four Parts of the Code apply on the same terms everywhere. The retendering rule has no general provincial equivalent, and unjust dismissal gives a non-union employee a reinstatement remedy provinces do not.
One thing lines up. The federal cut-off is 13 weeks, and Treadstone Law describes the Ontario window the same way: service continues “only if you hire them within… thirteen weeks”. Check the trigger dates against subsection 189(1.2), which measures from the earlier of the last day and the transfer.
SECTION 09 OF 09
Start with the runs, not the paperwork. Pull twelve months of dispatch records and ask one question: does any regular lane cross a provincial or international boundary? If yes, the seller is federally regulated whatever its bookkeeper assumed. If the honest answer is “sometimes”, that is a question for counsel before it is a line in the model.
Then price the continuity. Get true hire dates — not payroll-system start dates — and rebuild each section 189 service record. Check the section 184 vacation tier was actually paid: a seller applying provincial minimums to a federal workforce has a shortfall that transfers with the people. Watch anyone crossing twelve months between signing and closing, the line for both severance and unjust dismissal. If a terminal is closing, section 212 demands 16 weeks’ notice to the Head before terminating 50 or more employees in an industrial establishment.
Treadstone Law’s guides to buying and selling a trucking company and transportation and logistics cover operating authority, carrier safety and PPSA diligence — the first notes “carrier regulation is set federally and provincially, not by city hall” — but neither addresses the Canada Labour Code. Its employee-file diligence list, its note on buying only some contracts and its successor employer explainer are all framed for Ontario.
No. Section 189 deems employment continuous regardless of how the transfer happens or how much of the business changes hands, and it applies whether the deal is structured as a sale, merger, asset purchase or share purchase — deal structure does not touch it.
Not reliably. A carrier gets its safety fitness certificate from a provincial authority even when it is federally regulated, because the Motor Vehicle Transport Act hands administration of extra-provincial carriers back to the provinces — the real test is whether any regular lane crosses a provincial or international border, not who issued the certificate.
Yes, but the exits are narrow: a gap of more than 13 weeks between the employee’s last day and their first day with the buyer, notice the seller already gave under section 230, or severance the seller already paid under section 235. A covenant promising the seller will pay it is not the same as it actually being paid.
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