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onlythelargest

dominatetheheadlinesCorporationsareconstantlyreorganizingAll

ofthiscorporateactivity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structures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purchasersorvendorsofthesaleofa

businessorbusinessassets

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

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

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

 IanRolandisoneofthefoundingpartnersofPaliareRolandRosenbergRothstein

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

IRDK

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

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

paredtorecognize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the

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

TheNokesrulehasbeen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entireperiodofemployment

withthevendorandpurchaserforreasonablenoticepurposesandfor

seniorityrightsandbenetsinmanycircumstances

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purchasermustclearlyandexpresslyinform

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

mayrequirethevendortomakeallrequiredseveranceandreasonable

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

ThelegislatureinOntarioandelsewhereinCanadahaspreserved

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

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

tinuestoworkforthepurchaserApurchaser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erentemploymentcontextthat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theEmployersandWorkmenActwithunlawfully

absentinghimselffromworkforoneday

NodoubttheHouseofLordsdecisionwasviewedasenlightened

atthetimeItheldthatMrNokescouldnotbeunilaterallytransferred

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citizenunderourlawwastherighttochoosefor

himselfwhomhewouldserveandthatthisrightconstitutedthemain