Businesses can change ownership from time to time, but what happens to employees once this happens is extremely important. The last thing you want is for them to feel worried about potential takeovers and what this might mean for their employment.
If you’re looking to purchase a business or transfer ownership to someone else, you need to be aware of how you must treat your potential new employees. You must avoid breaching their employment contract.
In this guide, we’ll look at what continuity of employment is, the rights of employees when a business is sold, and the provincial legislation regarding this.
What is Continuity of Employment?
Continuity of employment is a provision that protects your employees should you want to sell the business or transfer it to a new owner.
What Happens to Employees if the Business is Sold?
If the business is sold, the continuity of employment provisions ensures that your employee’s past length of service is recognized by the new owners if the employee continues to work for them.
As an employer, you need to understand your employee’s rights if the business is sold. That’ll help to make the process as smooth as possible.
There are different provisions throughout Canada that cover this. Ensure you’re aware of your provincial legislation:
Continuity of Employment Ontario
In Ontario, continuity of employment is covered by the Employment Standards Act, 2000 (ESA).
These provisions ensure that when a business is sold or transferred to a new owner and the employee continues to work for the new owner, the employee's duration of service under the previous owner is recognized.
It also ensures that any accrued benefits and rights are recognized and transferred along with the sale of the business.
The continuity provisions also apply to the employee of a building services provider when the provider no longer holds the contract at the building and the employee is hired to work for the new provider at the same building.
Building service providers are responsible for services, such as cleaning, security, parking, property management, etc.
However, the continuity provisions in Ontario do not apply if the employee is hired by the new owner more than 13 weeks after their last day of employment with the previous owner or day of the business sale – whichever happens first.
Continuity of Employment BC
British Columbia's Employment Standards Act states that if all or part of a business is sold, or the business continues to operate under a receiver or receiver-manager, the employment of an employee of the business is considered to be continuous and uninterrupted by the sale or receivership.
Continuity of Employment Alberta
Under Alberta's Employment Standards Code, "the employment of an employee is deemed to be continuous and uninterrupted when a business, undertaking or other activity or part of it is sold, leased, transferred or merged or if it continues to operate under a receiver or receiver‑manager".
Though the code doesn’t go into details about the length of service or the transfer of benefits, it’s implied.
Get Help With Employee Management Today With BrightHR
Making sure your employees can continue employment if you sell your business is crucial.
You need to ensure that you make the process as stress-free as possible and that your employees understand what a takeover means for their jobs.
An employee’s contract should never be breached because of new owners. If you need assistance with employee management, BrightHR has a range of tools that will simplify day-to-day HR tasks.
Our unlimited, cloud-based HR document storage will help you to manage your employment contracts, maintain employee records and securely store any other important documents and policies.