In an Ontario share sale, your employment contract automatically continues with the new owner. In an asset sale, your employment is technically terminated by the seller, triggering potential severance obligations, though the buyer may offer you a new contract. Initiating a civil claim at the Superior Court of Justice to fight for your severance typically costs $339 CAD in filing fees.
When the company you work for is bought or sold, the uncertainty can be incredibly stressful. 📍 In Ontario, corporate mergers and acquisitions generally fall into two categories: a share sale or an asset sale. How the transaction is legally structured completely dictates what happens to your job, your previous years of service, and your right to common law severance pay.
Many employees mistakenly believe that a change in ownership always means they can demand a massive severance package and leave. However, employment law heavily depends on the exact legal mechanism of the sale. Understanding the difference between these two transactions is absolutely crucial to protecting your livelihood and ensuring you do not accidentally forfeit your legal rights.
Step-by-Step Process in Ontario
Whether your employer is a large corporation in Toronto, a manufacturing plant in Mississauga, or a retail chain in Ottawa, corporate sales follow strict legal protocols. 📚 If an acquisition is announced, follow these specific steps to secure your entitlements.
Step 1: Identifying the Type of Transaction
The very first step is to politely ask HR or management whether the transaction is a share purchase or an asset purchase. In a share sale, the buyer purchases the legal entity itself (the corporation). In an asset sale, the buyer only purchases the company’s equipment, intellectual property, and client lists, leaving the original legal entity behind.
Step 2: Navigating a Share Sale
If it is a share sale, you do not need to do anything. 📝 Your employment continues completely uninterrupted. The new owners step directly into the shoes of the previous owners. Your salary, your vacation time, and your years of service are fully preserved. You cannot demand severance simply because the company’s shareholders have changed.
Step 3: Navigating an Asset Sale (Technical Termination)
If it is an asset sale, the situation is drastically different. Under Ontario common law, an asset sale legally terminates your employment with the seller because the buyer is not legally obligated to take on the seller’s employees. The seller technically owes you severance pay, unless the buyer offers you a new, identical position.
Step 4: Evaluating the Buyer’s Offer of Employment
In most asset sales, the new buyer will offer you a new employment contract to keep the business running smoothly. 💼 You must read this new contract very carefully. If the buyer offers you a job on substantially the same terms (same pay, same location, same duties) and recognizes your past years of service, you generally must accept it.
Step 5: The Duty to Mitigate Your Damages
If the buyer offers you a virtually identical job and you stubbornly refuse it just because you want to cash out a severance package from the seller, you will likely lose your case. In Ontario, you have a strict legal duty to “mitigate” (reduce) your financial losses. Refusing a comparable job offer from the new buyer is considered a failure to mitigate.
Step 6: Claiming Constructive Dismissal
If the buyer’s new offer involves a massive pay cut, a demotion, or a forced relocation to a different city, you have the right to reject it. 💰 At this point, you can treat your employment as terminated (constructive dismissal) and pursue full severance pay from the seller. You must consult an employment law firm before rejecting the offer.
Step 7: Filing a Claim at the Superior Court
If the seller refuses to pay your severance after an asset sale, your lawyer will draft a Statement of Claim. This document is formally filed at your local Superior Court of Justice to launch a wrongful dismissal lawsuit.
How Much Does it Cost in Ontario?
Pursuing legal action against a corporate seller involves several predictable costs:
- Court Filing Fees: To officially start a civil lawsuit at the Ontario Superior Court of Justice, you must pay a filing fee of $339 CAD.
- Law Firm Fees: Most Ontario employment lawyers will take a strong severance case on a contingency basis, meaning they keep roughly 25% to 35% of your final settlement. If you simply want a lawyer to review the buyer’s new contract, expect to pay an hourly rate of $300 to $650 CAD.
- Mediation Costs: If the dispute goes to private mediation, the half-day session usually costs between $1,500 and $3,500 CAD, often split between the parties.
How Long Does the Process Take?
The transition period during a corporate sale can be chaotic, but legal claims follow a strict statutory timeline. ⌛
- The Notice Period: You must usually accept or reject the buyer’s new job offer within 1 to 2 weeks of receiving the new contract.
- Limitation Period: Under the Limitations Act, you have exactly 2 years from the date of the asset sale (your official termination date) to file a lawsuit against the seller.
- Litigation Timeline: If your severance dispute requires a lawsuit, negotiating a settlement through the Superior Court system typically takes 12 to 24 months.
Frequently Asked Questions (FAQ)
Does the new buyer have to recognize my previous years of service?
Under the Ontario Employment Standards Act (ESA), if a buyer hires you immediately after an asset sale, your employment is considered continuous for the purposes of calculating future minimum severance and vacation entitlements. However, their new common law contract might try to limit future payouts, so always have a lawyer review it.
What if the seller goes bankrupt during the sale?
If the seller enters formal bankruptcy, collecting severance becomes extremely difficult as you become an unsecured creditor. You may need to rely on the federal Wage Earner Protection Program (WEPP) to recover a portion of your lost wages and severance.
Can the new owner put me on a probationary period?
In an asset sale, a buyer will often attempt to insert a 3-month probationary period into the new contract. Generally, courts frown upon this if you are a long-term employee doing the exact same job. Signing it without legal advice can be risky.
If I accept a lesser role with the buyer, can I still sue the seller?
Yes, this is possible. If the new job pays significantly less, you may accept the new role to “mitigate your damages” while simultaneously suing the seller for the financial difference between your old salary and your new salary during your reasonable notice period.
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