the same type of operation as the vendor; and whether the purchaser continues at the same location as the vendor. New Employment Contracts? continue under the same employment contracts unless new contracts are entered into. A purchaser should be aware that it will need to provide fresh consideration to an employee in order for a new employment contract to be enforceable. The promise of continued employment does not qualify as consideration. Changes made to an existing employment contract should be done with caution. If the changes are material, an employee may claim that he or she has been constructively dismissed and is owed termination pay. Fresh consideration is also necessary for any changes to an employment contract to be enforceable. In an asset purchase, employees who are offered employment will usually sign new employment contracts. A purchaser should be careful if it chooses to hire some employees and not others, to ensure it does not choose not to hire someone for reasons contrary to Ontario human rights legislation. Choosing not to hire someone due to a disability or another prohibited ground may give rise to a human rights claim by the employee. As stated previously, if the transaction constitutes a sale of a business under the Act, the employee's employment will be deemed to be continuous and uninterrupted by the to recognize the employee's length of service with the vendor under the Act. Not Offered Employment or Refuses Employment? employment, the vendor will be liable for termination pay owed unless reasonable notice of termination has been provided. For this reason, vendors negotiate for the inclusion of a term in the Agreement of Purchase and Sale requiring the purchaser to offer employment to all employees on substantially similar terms and conditions. If a purchaser knows that it will not hire certain employees, it will want an indemnity or some allocation of costs for termination from the vendor. If the employee refuses an offer of employment by the purchaser and the term and conditions of the offer were substantially similar to those provided by the vendor, the purchaser would likely have no common law claim for termination pay against the vendor or the purchaser. This is because the employee will likely be deemed to have failed to mitigate his or her damages by accepting alternative employment. However, the employee will still be owed his or her minimum termination pay under the Act. Considerations: purchaser should consider the following items early in negotiations: enforceable employment contracts of employment? It is prudent to gather a full list of all employees with their compensation, job title, length of service and status clearly outlined. will largely depend on whether the transaction is a share or an asset purchase. This issue can have a major financial impact. the employees? Will this be adjusted on closing? This would require investigating if there are claims under various statutes such as the Pay Equity Act, the Occupational Health and Safety Act, the Employment Standards Act, 2000 and the Workplace Safety and Insurance Act, 1997. transaction. This article has only addressed some of the issues that need to be taken into consideration from an employment perspective. When considering selling or purchasing a business in Ontario, we recommend engaging legal counsel early in the process. This will help avoid unwanted surprises that may result in increased costs or unnecessary delay. |