When a company is sold or shuts down in Ontario, employees often worry about the same thing: what happens to my job — and am I owed severance?
Ontario law does not treat every business sale or closure the same way. Employee rights depend on what type of transaction occurred and how it affected your employment.
This guide explains Ontario employee rights when a company is sold or closes, including severance entitlements, job transfers, and what to do if your employer changes the terms of your work.
What Happens to Employees When a Company Is Sold in Ontario?
A business sale does not automatically end employment in Ontario.
In many cases, employees continue working for the new owner. In other situations, the sale results in termination, changes to pay or role, or pressure to sign a new contract.
Ontario law looks at how the sale affects the employee, not just the fact that a sale occurred.
Do Employees Automatically Transfer to the New Owner?
Sometimes — but not always.
Whether employees transfer depends on the structure of the sale.
Asset Sale
- The buyer purchases assets, not the company itself
- Employees do not automatically transfer
- Employees who are not rehired are usually terminated
- The seller typically owes severance
Share Sale
- The buyer purchases the company’s shares
- Employment usually continues without interruption
- The new owner assumes employer obligations
- Severance is only owed if employees are later terminated
What Is “Continuity of Employment” in Ontario?
In Ontario, continuity of employment means that an employee’s length of service may carry over even if the business is sold or ownership changes.
When a new owner keeps employees on after a business sale, Ontario law often requires the employer to recognize prior service for purposes such as severance, notice, and other employment rights.
Continuity of employment commonly applies when:
- A business is sold and employees continue working for the new owner
- Employees transfer to a related company or affiliate
- An employer restructures but the employee’s work remains substantially the same
Employers sometimes attempt to break continuity of employment by asking employees to sign new contracts that reset service. Employees should be cautious before signing anything that affects their length of service.
Are Employees Entitled to Severance Pay After a Business Sale?
Ontario law does not grant severance simply because a business is sold.
However, employees may be entitled to severance if the sale results in:
- Job loss
- A significant reduction in pay or responsibilities
- A forced relocation
- Pressure to accept a worse employment contract
👉 For a step-by-step breakdown of severance, employee transfers, and what to do next, see our guide on what happens to employees if a business is sold in Ontario.
What Happens to Employee Rights If a Company Closes in Ontario?
A company closure is different from a business sale.
When a company shuts down, employees are typically terminated, which triggers severance obligations under Ontario law.
Employees may be entitled to:
- Termination pay
- Statutory severance pay (if eligible)
- Additional common-law severance
👉 Learn more about severance and notice obligations in our guide to employee rights when a company closes in Ontario.
What Happens to Length of Service After a Business Sale?
If a new owner keeps employees on, Ontario law often requires the employer to recognize prior length of service.
Length of service affects:
- Severance entitlements
- Notice periods
- Benefit calculations
⚠️ Some employers attempt to reset service through new contracts. Employees should proceed carefully before signing anything.
Do Employees Have to Sign a New Employment Contract After a Sale?
No.
Ontario employers can’t force employees to sign a new employment contract immediately after a business sale.
New contracts may attempt to:
- Limit severance rights
- Remove recognition of prior service
- Add termination clauses that benefit the employer
⚠️ Employees should review any new contract carefully before accepting it.
Key Takeaway for Ontario Employees
A business sale or company closure does not erase employee rights.
Ontario law may entitle employees to severance or other compensation when:
- An employer ends their job
- An employer significantly changes their role or pay
- An employer pressures them to accept a worse contract
⚠️ Because the outcome depends on the specific facts, employees should get legal advice before accepting severance or signing anything new.
Get Advice From an Ontario Employment Lawyer
If your employer sells the business or closes operations and your job is affected, an Ontario employment lawyer can review your situation and explain your legal options.
The team at Samfiru Tumarkin LLP has helped more than 50,000 non-unionized employees enforce their workplace rights when employers fail to follow the law.