Staff the buyer hires do not start over. Employment Standards Act, 2000 section 9 deems their employment not to have been terminated by the sale, and their years with the seller to have been years with the buyer. Notice, severance and vacation are then calculated on service that began long before the buyer existed.
Key takeaways
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Part IV of the Act, marginal note Sale, etc., of business. Subsection (1): “If an employer sells a business or a part of a business and the purchaser employs an employee of the seller, the employment of the employee shall be deemed not to have been terminated or severed for the purposes of this Act and his or her employment with the seller shall be deemed to have been employment with the purchaser for the purpose of any subsequent calculation of the employee’s length or period of employment.”
Two rules doing different work: the sale is not a dismissal, so nothing falls due at closing for those who carry on; and the clock does not reset, so entitlements measured in years run on the combined total. Subsection (4) extends the chain back through predecessor Acts — a business sold three times in twenty years carries all twenty to the fourth owner. Treadstone Law on successor-employer status separates inherited service from inherited debt.
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Wider than a signed deal. Subsection (3): “‘sells’ includes leases, transfers or disposes of in any other manner, and ‘sale’ has a corresponding meaning.” A share purchase does not engage section 9 at all — there the employer is the corporation, which does not change. Treadstone Law tracks who carries termination pay in each structure along that fault line.
It reaches part of a business too: Ontario’s continuity of employment guide works through a dairy selling only its ice cream division, and the employee who moves keeps her full dairy service. Section 4 can also treat related businesses as one employer.
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Subsection (2) is the single limit on the rule: “Subsection (1) does not apply if the day on which the purchaser hires the employee is more than 13 weeks after the earlier of his or her last day of employment with the seller and the day of the sale.” Note earlier: the clock can start before closing, on the employee’s last worked day, so a buyer counting from the closing date counts from the wrong end.
It catches buyers who plan a pause — a renovation, a licence transfer, a closed season — then rehire the old crew. Treadstone Law’s note on gaps before reopening has it right: the window runs to the hiring date, not to the day trading resumes.
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Section 54 bars terminating “an employee who has been continuously employed for three months or more” without notice under section 57 or 58, or pay in lieu under section 61. The ladder climbs from one week below a year of service to “at least eight weeks before the termination, if the employee’s period of employment is eight years or more”.
Eight weeks is the ceiling, so a buyer can inherit a workforce already at it. The ministry’s example is a ten-year retail employee whose new owner downsizes six months after buying: “Since she is considered to have been employed with the business for 10½ years, she is entitled to receive the maximum period of written notice or pay in lieu of notice required under the ESA, in this case eight weeks.”
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Severance is a separate entitlement from notice, and the one routinely missed. Section 64(1) requires it where the employee “was employed by the employer for five years or more” and the employer “has a payroll of $2.5 million or more”.
Section 65(1) multiplies “the employee’s regular wages for a regular work week” by completed years plus completed months over twelve — a week per year, prorated — and subsection (5) caps it at 26 weeks. Subsection (2) widens the base: “All time spent by the employee in the employer’s employ, whether or not continuous and whether or not active, shall be included”.
So the same ten-year employee also collects “10½ weeks of severance pay”. Treadstone Law on whether an asset purchase avoids severance is honest about it: the deal sheds pre-closing debts and the duty to hire anybody, and sheds nothing about the service of anyone kept. Its piece on severance in an asset sale walks the thresholds.
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Section 33(1) gives “at least two weeks after each vacation entitlement year that the employee completes, if the employee’s period of employment is less than five years”, and three weeks at five or more. Section 35.2 moves the money on the same threshold: 4 per cent of wages below five years, 6 per cent at five or more.
An employee who crossed five years under the seller therefore arrives already on three weeks and 6 per cent — a step-up no payroll file flags. Nor does accrued vacation vanish at closing: section 38 requires it paid out when employment ends, and the ministry’s guide puts vacation accrued in the seller’s final months on the purchaser. Treadstone Law notes that a vacation payout is wages, not a retiring allowance.
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O. Reg. 288/01 lists the employees owed no notice or termination pay — wilful misconduct, frustration, construction employees, and at paragraph 5 “An employee whose employment is terminated after refusing an offer of reasonable alternative employment with the employer.” Its section 9(1) repeats that refusal ground for severance.
None is a sale-of-business exemption. The regulation says the offer must be employment “with the employer”, and neither it, the Act nor the guide says whether a purchaser’s offer to a seller’s employee counts — I could not source an answer. Treadstone Law’s answer on declining to work for the new owner turns instead on comparing old terms with new, and section 56(1)(b) treats constructive dismissal followed by resignation as a termination.
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Where a buyer takes the assets but not the whole workforce, a second regime engages. Section 58(1): “Despite section 57, the employer shall give notice of termination in the prescribed manner and for the prescribed period if the employer terminates the employment of 50 or more employees at the employer’s establishment in the same four-week period.” The prescribed periods are eight weeks from 50 to 199 employees, twelve to 499, sixteen above.
Treadstone Law’s piece on mass termination notice in a business sale lists the patterns that reach it: a buyer taking part of a workforce, a collapsed deal, pre-sale consolidation. Watch the near-collision — section 64(1)(a) uses the same 50-employee figure for severance, but over six months rather than four weeks.
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Ontario banned employee non-competes in 2021. Section 67.2(1): “No employer shall enter into an employment contract or other agreement with an employee that is, or that includes, a non-compete agreement.” The Act records it in force 25 October 2021; subsection (2) makes a contravening agreement void.
The carve-out is subsection (3): “If there is a sale of a business or a part of a business and, as a part of the sale, the purchaser and seller enter into an agreement that prohibits the seller from engaging in any business, work, occupation, profession, project or other activity that is in competition with the purchaser’s business after the sale and, immediately following the sale, the seller becomes an employee of the purchaser, subsection (1) does not apply with respect to that agreement.” The condition doing the work is the last one.
The ministry’s guide adds a condition the statute does not contain — “there is a sale or lease of a business or a part of a business that is operated as a sole proprietorship or a partnership”. Those words are on the guide’s non-compete page and nowhere in section 67.2 — a Ministry of Labour position, not the Act. See also Treadstone Law on why vendor covenants differ.
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For every employee the buyer intends to keep, take combined service at closing and ask what termination a year later costs: notice from the section 57 ladder to a maximum of eight weeks, severance under section 65 to a maximum of 26, plus unpaid accrued vacation. On parameters of my own choosing rather than data — $1,200 a week, twelve years’ service at closing, payroll over $2.5 million — that is $9,600 of notice plus $15,600 of severance: $25,200 for one person, almost none of it earned under the buyer.
And the Act is the floor, not the ceiling. Section 5(1) voids contracting out of an employment standard, subsection (2) lets a better contractual right displace it, and section 8(1) preserves civil remedies. Common-law reasonable notice sits above these numbers where no enforceable termination clause exists — Treadstone Law on reviewing employment contracts and undisclosed severance liabilities both note that a defective clause removes the cap.
Two boundaries. All of the above is Ontario law; every other province has its own employment standards statute, and this page describes none of them. A federally regulated business is outside the ESA entirely: Canada Labour Code section 189, marginal note Transfer, deems employment “to be continuous with one employer” on a transfer “by sale, merger or otherwise”, with its own 13-week limit. Treadstone Law on a seller timing a termination before closing sets out who carries a pre-closing dismissal.
No. Section 9 applies where an employer sells a business and the purchaser employs the seller’s employee, but in a share purchase the employer is the corporation itself, which does not change — so section 9 does not engage at all.
Yes. Where 50 or more employees at the employer’s establishment are terminated in the same four-week period, a mass-termination notice requirement applies on a prescribed schedule — eight weeks for 50 to 199 employees, twelve up to 499, sixteen above — a different trigger from the five-years, 50-employee test used for severance.
No, there is a specific carve-out. The ban on employee non-competes does not apply to an agreement made as part of a sale of a business that prohibits the seller from competing with the purchaser afterward, provided the seller becomes an employee of the purchaser immediately following the sale.
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