Canada: Employment And Labour Considerations In Business Transactions - Part II: Typical Labour And Employment Issues

Last Updated: April 11 2011
Article by Earl Phillips

Most Read Contributor in Canada, September 2018

Those who plan, structure and execute business transactions, and those with HR and Labour Relations responsibilities in the organization, must identify and understand the employment and labour issues, take appropriate steps to ensure the objectives of the transaction are met, and avoid unintended consequences. In our previous issue of the LEQ, we looked at the importance of gaining an early and complete understanding of the proposed transaction. Here in Part II, we provide a summary guide to the labour and employment issues that typically arise.

1) Terms of employment

You need full information about all terms and conditions of employment: the statutory and common law requirements, written terms in employment contracts, collective agreements, and policies.

2) Collective bargaining obligations

Review all collective agreements for provisions relevant to the transaction. Some collective agreements even have obligations that are triggered by a sale of shares.

Certifications granted by labour relations boards and scope clauses of collective agreements have to be reviewed to understand the full scope of collective bargaining obligations that may affect the transaction.

Review the expiry date of collective agreements and consider if the bargaining cycle could affect, or may be affected by, the proposed transaction.

Advance notice to unions of a proposed transaction, and negotiation of an adjustment plan, may be required by statute or a collective agreement. This can affect the timing of a transaction and other disclosure obligations a party may have. Even without such an obligation, the parties should consider how and when to inform the union of the proposed transaction.

3) Union and non-union successorship

Most asset purchase transactions will trigger successorship under labour law, i.e., the buyer of the business will become bound to the certifications, collective agreements and ongoing labour disputes of the seller. That requires a full review of the current state of labour relations, collective bargaining, and grievances.

Less well-known is the concept of non-union successorship. Employment standards legislation generally deems employment to be continuous when a business is sold and the employees continue in employment with the buyer. In such cases, the seller will not have termination obligations, but the buyer takes the employees with accrued seniority and other rights. Each jurisdiction is different, so the applicable statute must be considered.

The common law also has a form of successorship by presuming the buyer hires employees from the seller with the employees' accrued length of service for things like benefits, vacation and future termination.

4) Offers of employment

When and how offers of employment are made by a purchaser will depend on many factors, including applicable legislation, the state of the transaction negotiations, restrictions on disclosure, getting set up to take over the employees, and the desired human resources outcome. To whom offers are to be made, and on what terms, is governed by the terms of the deal. A purchaser has to be sure it can meet an obligation to offer employment on "the same" or "substantially similar terms" if required by the agreement.

5) Terminations

The full cost of terminations, and who will bear that cost, must be considered. The liability will flow from specific employment contract provisions, the common law and statute.

Common law obligations for reasonable notice of termination will require gathering and reviewing information about the affected employees; in particular, their age, length of service, character of employment, and availability of suitable alternative employment.

All employment standards statutes in Canada provide for a minimum amount of notice or compensation in lieu of notice to be provided. Some statutes also require severance pay.

Employment standards statutes also have provisions for the termination of large numbers of employees in a short period of time. The numerical and timing triggers for group termination provisions, and how they might apply to a group of related entities, have to be reviewed in each jurisdiction.

6) Employees not actively at work

There may be a large number of employees who are not actively at work when the transaction is closed. Employees may be away from work for any number of reasons – statutory leaves such as maternity or parental leave, disability, leaves of absence – and with varying degrees of certainty about their return to work.

This can be a problem for both the buyer and seller: the seller wants all employees of the business to be hired by the buyer; the buyer does not want liability for employees who may not return to work any time soon. Meanwhile, both buyer and seller have to recognize the rights and interests of the employees. An employee on leave from work may be protected by human rights legislation, and benefits could be adversely affected by the transaction.

7) Employment/labour litigation

A comprehensive review of all current, pending and threatened employment and labour claims is important. It will help to identify prospective liability and can help to guide negotiations on price and price adjustments, holdbacks, indemnities, and the handling of claims after closing. It will also help to provide a general sense of the human resource and labour relations climate in the organization and identify corrective actions that are necessary.

8) Pensions and benefits

An early understanding of the pension and benefits plans that each party has will assist negotiations on issues such as the buyer's obligation to offer comparable employment to the seller's employees. Before committing to offering employment on the "same" or "substantially similar" terms of employment, it is necessary to understand the details of the pension and benefits plans and determine what can be offered and how soon.

Pension statutes and related income tax laws, at the very least, may impose registration requirements with strict time limits.

Some time, effort and expense will be required to ensure a defined benefit pension plan is fully and properly funded.

9) Workers' compensation

Provincial and Territorial statutes governing compensation for workplace injury and illness will apply to almost all employees in Canada. These mandatory insurance schemes use different methodologies, but generally assess employers based on the nature of the industry and the employer's safety record.

A transaction may involve combining or separating businesses with different assessment rates in the same province or territory. An early review of the assessment rates and safety records of the employers involved is required to see if there is an opportunity for a lower assessment rate, or a risk of a higher assessment rate.

10) Employment Insurance, Canada Pension Plan

An often overlooked but sometimes significant issue is the effect of a transaction on an employer's Employment Insurance and Canada Pension Plan contributions. Such contributions are subject to a yearly maximum and many employers reach that maximum long before the end of the year. However, depending on the nature of the transaction, a new employer may have to restart contributions. Early identification of the issue may allow for changes to the timing or structure of the transaction to minimize or eliminate the extra liability.

11. Immigration

Employees of a party who need to come to Canada to negotiate the transaction or conduct due diligence, may be able to enter as business visitors, but on certain conditions. Others may not qualify for business visitor status and may need to obtain a special visa before arriving.

If the transaction will involve hiring an employee on a work permit, application must be made to vary the work permit to show the name of the new employer. In some cases, a labour market opinion will be required. Any offer of employment should be conditional on obtaining the new work permit.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions