Changing Employers: The Employment Implications of the Sale of a Business - Common Law and Statutory Rights and Obligations

• Author: Ian J. Roland and Danny Kastner
• Pages: 259-274



ChangingEmployers

TheEmploymentImplicationsofthe

SaleofaBusinessCommonLawand

StatutoryRightsandObligations

Ian Roland and Danny Kastner*

A. INTRODUCTION

Todayemployeesrarelyworktheirentirecareerwiththesameemployer

Businessesof everysize arebought andsoldin Ontarioon adaily ba-

sisMergersand acquisitionsare socommonplacethaton lythelargest

dominatetheheadl inesCorporationsareconst antlyreorganizingA ll

ofthiscorporateact ivityaectsthedailyworkinglivesofthousandsof

employees

Employeesnd t hemselves shueda longwit h corporateas sets

betweencorporateentitiesEmployeesmayndthemselvesreassigned

toworkforseparatecorporateentitiesorrelatedemployerswithinlarge

andoencomplexcorporatestruct uresorforbusinesses thatarequite

separatefromtheirformeremployer

Thefocusof thispaperisthe employmentlawimplicationsforem-

ployeesandemployerswhetherpurchas ersorvendorsofthe saleofa

businessorbusinessasset s

The legal analysis begin s with the traditional common law rule

known asthe Nokes rulethat acont ractof employmentcannot beas-

signedbyoneemployertoanotherConsequentlyaccordingtotherule

 IanRolandisoneofthefou ndingpartnersofPalia reRolandRosenbergRothstei n

LLPDannyKastneris an assoc iatewithPaliareRolandRosenber gRothsteinLLP

IRDK

anemployeewhocontinuesemploymentwitha purchaserforfeits rec-

ognition ofthat serviceby thepu rchaserunless thepurchaseris pre-

paredtorecog nizetheemployeespreviousservice withthevendorIn

eecttheemployeestartsemploymentserviceanewwiththepurchaser

Ontheother handiftheemployeefailstoacceptemploymentwitht he

purchasershemayhavefailedtomitigateherdamages

TheNokesrulehasbe enfoundbothbyourcourtsandbylegislators

tobeunfairlyharshtoemployeesThecourtshavetemperedtheprejudi-

cialeectoftheNokesrulebycountingtheenti reperiodofemployment

withthe vendorandpurchaser forreasonablenoticepurpo sesandfor

seniorityrightsandbenetsinmanyci rcumstances

Ifapurchaserwishestoavoidtheimpactofthesecourtdecisionsthat

make the purchaser respon siblefor the employeesperiod of employ-

mentwiththevendorthepurcha sermustclearlyandexpresslyinform

the employee thatit will notrecogni zesuch service orthe purchaser

mayrequire thevendortomakea llrequireds everanceandreasonable

noticepaymentsasaconditionofthepurchaseandsale

ThelegislatureinOnta rioandelsewhereinCanadahaspreserved

anemployeesemploymentcontinuityfordesignatedstatutorypurposes

onlywherethe saleofa businesshas occurreda ndtheemployeecon-

tinuestoworkforthepurchaserApurchas ercannotavoidthereachof

these statutory provisions although it may contract for the vendor to

indemnifyit

B. THE NOKES



Themodernlegal treatmentofemployeesunderthe saleordisposition

ofa businessbegan ina verydiere ntemploymentcontextt hattoday

seems quaintly arcane More tha n sixtyveyears ago the House of

LordsfoundinfavourofMrNokesacoalminerwhohadbeencharged

andnedundert heEmployersandWorkmenActwithunlawfully

absentinghimsel ffromworkforoneday

Nodoubtt heHouse ofLordsdecision wasviewed asenl ightened

atthetimeItheldth atMrNokescouldnotbeunilaterallytransfer red

against his wil lf rom one employer to another The House of Lords

found that it wasa fundamenta l principle of our common law that

individualshad aright tochoose theiremployerEngrained inthe

personal statusof ac itizenunder our lawwast heright tochoos efor

himself whomhewouldservea ndthatthi srightconstituted themain