Continuity Of Employment: Tribunal Reaffirms Employee Protections In Enterprise Transfers

On May 16, 2025, the Tribunal administratif du travail (the "Tribunal") rendered a significant decision¹ addressing the rights of employees in the context of a business sale and the attempted exclusion of an employee from continued employment. The dispute centered on the legitimacy of an employee's (the "Complainant") termination following the sale of their employer. The Complainant alleged dismissal without just and sufficient cause under the Act respecting labour standards² (the "Act"), arguing that their employment should have continued seamlessly with the new ownership after the sale. Both entities, seller and buyer, however, contended that the Complainant was never employed by the buyer post-sale, relying on a contractual clause negotiated during the transaction to exclude the Complainant from continued employment. The Tribunal was called upon to determine whether the Complainant's dismissal was without just and sufficient cause and whether the contractual arrangements between the parties could override statutory protections.

Timeline of Events

The Complainant had been employed as an administrative assistant at the seller's since 2008, performing a variety of administrative tasks and working closely with the owner. In the fall of 2023, the sale occured, with a transition period for relocating operations and staff. Despite the sale, the Complainant continued working at the original administrative offices, assisting the former owner with finalizing contracts and organizing documents.

On April 10, 2024, the Complainant received a letter of termination, citing the abolition of the position due to administrative reorganization. The Complainant subsequently filed a complaint under section 124 of the Act against both entities, alleging dismissal without just and sufficient cause. The buyer and seller contested the complaint, arguing that the Complainant was never employed by the buyer following the sale and that the complaint was filed outside the 45-day statutory period.

Analysis

Timeliness of the Complaint

A key preliminary issue was whether the complaint was filed within the 45-day window required by the Act. In this regard, the Tribunal found that the Complainant only became aware of the definitive termination on April 10, 2024, when the formal letter was delivered. The Tribunal reaffirmed that the limitation period begins when the employee understands their services are no longer required, not merely when work ceases. On this basis, the complaint was deemed admissible.

Dismissal Without Just and Sufficient Cause – Continuity of Employment

The central issue before the Tribunal was the principle of continuity of employment in the context of a business sale. The Tribunal began its analysis by reaffirming that, under section 97 of the Act and section 2097 of the Civil code of Québec³ (the "CCQ"), the sale, transfer, or restructuring of a business does not interrupt or terminate the employment contracts of its employees. These statutory protections are of public order and cannot be set aside or circumvented by private agreement between the seller and purchaser. The Tribunal found that the sale triggered these protections, meaning that all employees of the seller, including the Complainant, became employees of buyer by operation of law.

Despite this, the evidence revealed that the sale agreement included a clause specifically designed to exclude the Complainant from continued employment. It was determined that this clause was negotiated without the Complainant's knowledge and was intended to satisfy the preferences of a key individual at the buyer's. The Tribunal unequivocally rejected the validity of such a clause, holding that it was contrary to the Act and CCQ and therefore unenforceable. The Tribunal confirmed that a seller cannot terminate employment contracts simply to allow the purchaser to "start fresh" with new employees⁴.

Furthermore, the Tribunal found the buyer's argument that it had the discretion to choose whether to retain the Complainant fundamentally flawed. The Complainant's employment continued with the buyer by operation of law, and the organization was bound by the existing employment contract. The Tribunal stressed that the only lawful means of terminating the Complainant's employment would have been through a process that respected the requirements for just and sufficient cause, or a legitimate layoff based on objective business reasons. In this case, the purported abolition of the Complainant's position was found to be a façade, masking a decision to exclude the Complainant for subjective reasons unrelated to business necessity.

Conclusion

The Tribunal concluded that the Complainant was dismissed without just and sufficient cause and ordered reinstatement at the buyer's with all rights and privileges. The decision underscores that, in the context of a business sale, employees are entitled to continuity of employment and cannot be excluded by contractual arrangements or subjective preferences of the new employer. The Tribunal reserved its powers to address any difficulties arising from the reinstatement and to determine further appropriate remedies.

Key Takeaways

This decision highlights the complexities that can arise in the context of business transfers and the importance of understanding statutory protections for employees. The Tribunal's application of the law demonstrates that contractual arrangements between sellers and purchasers cannot override the continuity of employment guaranteed by the Act respecting labour standards and the Civil code of Québec. Employers must ensure that any business sale or reorganization respects employees' rights to continued employment, regardless of private agreements or subjective preferences.

The Tribunal's findings also reinforce that alleged misconduct must be addressed through transparent and progressive discipline, not used retroactively to justify exclusion or termination. Clear communication and documentation are essential throughout the transition process, and layoffs must be based on objective, legitimate business reasons rather than serving as a pretext for dismissing specific individuals.

Footnotes

1 Massé c. Structures Yamaska inc., 2025 QCTAT 2025.

2 Act respecting labour standards, CQLR c N-1.1.

3 Civil Code of Québec, CQLR c CCQ-1991.

4 Martin c. 3070336 Canada inc.(C.T., 1995-12-01), SOQUIJ AZ-96144511.

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