Employees may believe that a change in ownership of a company
results in a change in the terms of employment and requirement for
a new employment contract. However, in Whittemore v. Open Text Corporation, the
Ontario Superior Court made it clear that the original terms of
employment remained valid after a share purchase. The court
also made it clear that employees are required to advise their
employer if they do not accept a change to their terms of
The Plaintiff was employed as a software developer. He signed an
employment agreement in 1999 that contained various provisions,
including benefits, vacation time and a one-month paid sabbatical
after five years of service. The termination provision provided
employees with more than four years of service four weeks'
salary in addition to their entitlements under Ontario's
Employment Standards Act.
Two years after the Plaintiff signed the employment agreement,
the shares of the company were purchased by a larger entity. The
Plaintiff signed a non-solicitation and confidentiality agreement
with the new entity but no further documentation. The Plaintiff was
also advised that employees would no longer be eligible for a
The Plaintiff did not make any statements to the company about
the loss of the sabbatical and continued to work for the new
amalgamated entity for another nine years.
When the Plaintiff's employment was subsequently terminated,
he commenced a wrongful dismissal action, arguing that the original
contract of employment he signed was no longer valid.
Instead, he claimed that he was entitled to more generous
The court found that there had been a sale of shares and not a
sale of assets in this case. Where a business is acquired
pursuant to a share sale, the existing rights of the employees
continue to flow through to the successor employer. The Plaintiff
continued to work at the same salary, and with the exception of the
sabbatical, under the same terms.
At no time during the Plaintiff's employment did he advise
the Company that he was objecting to the loss of the sabbatical, or
that he did not believe the terms of the previous employment
contract continued to govern the parties' relationship.
Pursuant to the Ontario Court of Appeal's decision in Wronko vs. Western Inventory, an employee must
make it clear to an employer if the employee does not accept a
fundamental change to an employment contract.
The court said that the new entity had assumed the employment
contract, including the obligations with respect to dismissal, and
was entitled to rely on the termination provision in that
Take Away for Employers
This case would likely have been decided differently if the
company had acquired the employees pursuant to an asset purchase
where, presumptively and except in Quebec, the employment
relationship does not continue with the purchaser following the
However, it is clear that employees continue to bear the onus to
advise an employer if they object to a change to a term of
employment. Where the employee remains silent and continues to
report to work, the employee has accepted the change and the
employer is entitled to rely on that acceptance.
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 Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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).