Sale of business in Ontario: Rights to severance

In Ontario, non-unionized workers aren’t automatically entitled to severance if their employer sells the business.

However, if the sale of the business results in you losing your job, you are owed severance pay.

Who pays severance if the new owner doesn’t want to keep me?

The responsibility of providing severance pay after an acquisition depends on whether it was an asset purchase or a share purchase.

• Asset purchase: If assets of a business are acquired by another company, the transaction is generally treated as a termination of employment for impacted staff. In this scenario, the “seller” of the business would be responsible for providing severance if the new owner doesn’t want to keep certain workers.
• Share purchase: If a company acquires all shares of a business, it effectively steps into the role of the employer — requiring it to provide compensation if it lets certain staff members go at a later date.

If you lose your job as a result of a sale, and your employer refuses to provide you with severance, contact an experienced Ontario employment lawyer at Samfiru Tumarkin LLP immediately.

SEE ALSO
• Ford cutting 3,000 jobs as it focuses on electric vehicles
• If Suncor sells Petro-Canada, what rights do employees have?
• Employee rights when a company closes

How is severance pay calculated?

Severance for non-unionized employees in Ontario can be as much as 24 months’ pay.

This includes individuals working full-time, part-time, or hourly in the province.

The amount of compensation you are entitled to is calculated using several factors, including:

WATCH: Employment lawyer Lior Samfiru explains everything you need to know about severance pay on an episode of the Employment Law Show.

To figure out how much you could be owed, use our firm’s free Severance Pay Calculator. It has helped millions of Canadians determine their severance entitlements.

If your company doesn’t provide you with the correct amount, you have been wrongfully dismissed and should contact a member of our team.

We regularly resolve wrongful dismissal claims and can help you secure proper severance.

LEARN MORE
• Severance pay for provincially regulated employees
• Rights to severance for short-service employees
• Severance pay in a recession

Can the new owner make changes to my job if they keep me on?

You don’t have to accept major changes to your job that the new owner might try to enforce.

Large modifications such as a demotion, cut in pay, reduction in hours, or negative change to commission are illegal.

If you receive an employment offer from the new owner, and it includes different hours or pay, you can turn it down and still get full severance from the seller of the business.

• Example: A worker’s role was eliminated due to a merger that resulted in an organizational restructuring. She was offered a replacement role with the newly formed company, but it was going to be a demotion with decreased and altered job duties. The individual would also have to accept a roughly 15 per cent cut in pay. These changes to her employment made it reasonable for her to reject the new offer and she was still able to receive her severance entitlements.

Even without a good reason you can still get severance, but you would likely only receive your minimum entitlements.

If the new owner keeps you on without any changes to your position, but begins making significant alterations shortly after, it’s very likely that you could treat it as a constructive dismissal.

In this situation, the law allows you to resign and pursue full severance pay.

If you believe that you have been constructively dismissed, don’t quit your job until you speak with an experienced Ontario employment lawyer at Samfiru Tumarkin LLP.

SEE ALSO
• Changes to your employment in Alberta
• Can your employer change your job in B.C.?
• Do I get severance if I quit?

The new owner wants to keep me, what happens to my length of service?

Generally, if the new company that purchases the business decides to hire an existing employee on, they inherit that worker’s length of service.

• Example: You worked at your company’s Toronto facility for 12 years prior to the sale. If the new owner decides to keep you, they must acknowledge your length of service. If you are let go three years later, you are still owed severance pay based on the seniority that you built up before and after the sale.

Once you receive an employment offer from the new owner, review the contract carefully before accepting it. Employers might attempt to get out of recognizing your length of service in the new agreement.

Not only could this affect the amount of severance you receive if you are fired in the future, but it would also limit the entitlements of your total compensation package.

If you are unsure about what you are signing, an experienced employment lawyer at Samfiru Tumarkin LLP can review the contact and ensure it contains the correct clause to protect your seniority.

SEE ALSO
• Starting a new job? Here’s how an employment contract could limit your rights
• Employment Law Show: 5 things to know about employment contracts

The new owner wants me to sign my new employment contract immediately, what should I do?

Employers in Ontario can’t legally force you to sign a new employment contract.

While many workers believe that they need to sign to protect themselves, these agreements often take away protections that would otherwise be available to you.

LEARN MORE
• Employment contracts in Ontario

In addition to trying to get out of recognizing your length of service, the new owner of the business might attempt to add clauses that:

• Limit your rights at the outset of your employment
• Allow the company to make changes to the terms and conditions of your employment
• Limit your severance package to a few weeks’ pay
• Allow the company to lay you off without penalty in the future

If you are being pressured to sign you new employment contract immediately, remain calm and contact an experienced Ontario employment lawyer at Samfiru Tumarkin LLP.

SEE ALSO
• Employment Law Show: 5 things to never do before seeking legal counsel
• Accepted a severance offer without consulting a lawyer? Next steps

Lost your job? Contact an employment lawyer

If you lose your job after your employer sells the business, or for any reason, contact the experienced employment law team at Samfiru Tumarkin LLP immediately.

Our lawyers in Toronto and Ottawa can review your situation, enforce your workplace rights, and ensure that you receive the compensation you are owed.