Subscribe to our newsletters
Selling a Business in British Columbia: What Happens to Employees?
When a business is sold in British Columbia, employees often face immediate uncertainty about their jobs, their service recognition, and what they are owed. The legal answer depends primarily on the structure of the transaction whether it is a share sale or an asset sale and what happens to employees after closing. BC's Employment Standards Act creates strong continuity protections that apply in most asset sales where employees continue working, and BC courts take a broader view of prior service recognition than Ontario courts. Understanding the rules before the transaction closes is important for both sides.
Were you offered new employment terms after a business sale in BC that reset your service or limited your notice rights?
Signing a new employment agreement at the time of a business sale can extinguish your continuity rights and severance entitlement. Get advice before you sign anything.
Call: 1-800-771-7882 Speak With an Employment LawyerShare sale versus asset sale: the fundamental distinction
Share sale employer does not change
In a share sale, the purchaser buys the shares of the corporation that owns the business. The legal employer remains the same entity. Employees continue working for the same corporation without any change to their employment status, their length of service, or their entitlements. No termination is triggered and no notice is required solely because the shares changed hands.
From an employment law perspective, share sales in BC have little to no direct impact on employees at the time of the transaction. The employment relationship is unchanged and all accrued entitlements continue unaffected.
Asset sale continuity rules apply
In an asset sale, the purchaser buys the business assets rather than the corporation. The seller and purchaser are different legal employers. Employees may technically be terminated by the seller and offered new employment by the purchaser. However, BC law creates strong continuity protections where employees continue working after the sale.
Under Section 97 of BC's Employment Standards Act, where all or part of a business is sold and an employee continues working for the purchaser, employment is treated as continuous for statutory purposes. The purchaser must recognize the employee's prior service with the seller.
ESA continuity under Section 97 what it means in practice
Section 97 of BC's Employment Standards Act is the central provision governing employee rights in a business sale. Where the conditions are met a sale of all or part of a business, and the employee continues working for the purchaser the legislation deems employment to be continuous. This continuity applies regardless of whether the seller formally terminated the employee at closing.
| What continuity affects | Result for the employee |
|---|---|
| Termination notice or pay in lieu | Prior service with the seller counts toward the notice calculation the purchaser cannot treat the employee as a new hire |
| Vacation entitlements | Accrued vacation carries over and must be recognized by the purchaser |
| Length of service calculations | Combined service with the seller and purchaser determines the employee's total entitlements on any future termination |
| Common law reasonable notice | BC courts regularly credit prior service in asset sales where employment continues seamlessly and the employee's role remains substantially the same |
Notice entitlements when employment is terminated following a business sale
Under BC's Employment Standards Act, employees are entitled to notice based on their total length of service one week after three months, increasing to eight weeks after eight years. Where Section 97 continuity applies, service with the seller counts. Common law reasonable notice may significantly exceed these minimums and is calculated by BC courts on the employee's age, total length of service, position, compensation, and the availability of comparable employment. A valid contractual termination clause can limit the entitlement to ESA minimums, but only if it was properly drafted, agreed to at the right time, and not voided by the circumstances of the sale.
What employees and employers should do when a business sale is pending
If you are an employee in a BC business sale
- Do not sign any new employment agreement offered by the purchaser without first getting legal advice new agreements frequently contain terms that reset your service, limit your notice rights, or waive continuity protections
- Understand that continuing to work for the purchaser without signing a new agreement generally preserves your continuity rights under Section 97 of the ESA
- Where you are terminated rather than offered continued employment, assess whether the termination pay offered reflects your full service period including time with the seller
- Where employment terms are changed materially as a condition of continuing with the purchaser reduced pay, changed role, altered benefits get advice on whether this constitutes a constructive dismissal
If you are an employer or purchaser in a BC business sale
- Assess your termination notice exposure based on employees' combined service with the seller and purchaser do not assume you can treat continuing employees as new hires
- Allocate termination liabilities clearly in the purchase agreement who bears the liability for employees terminated at closing or within a defined period after?
- Draft new employment offers carefully offers that preserve continuity while providing enforceable termination clauses require precise drafting to be effective
- Be alert to the risk of inadvertent constructive dismissal material changes to employment terms offered to continuing employees may trigger claims even if no formal termination occurred
- Get legal advice on Section 97 implications before the transaction closes post-closing surprises on severance liability are common and avoidable
Dealing with a business sale and uncertain about employee rights or obligations in BC?
The employment law consequences of a business sale in BC depend on the transaction structure and how employees are treated at closing. Get advice before decisions are made that cannot easily be undone.
Employee Advice Employer Advice Or call us: 1-800-771-7882Frequently asked questions about employee rights in a BC business sale
Are employees automatically terminated when a business is sold in BC?
Not automatically. In a share sale, the legal employer does not change and employment continues unaffected. In an asset sale, employees may be technically terminated by the seller and offered new employment by the purchaser but where they continue working, BC's Employment Standards Act Section 97 deems employment to be continuous. The employee's prior service carries over and the purchaser cannot treat them as a new hire for notice or severance purposes.
Does my length of service carry over when a business is sold in BC?
Yes, in most cases. Under Section 97 of BC's Employment Standards Act, where all or part of a business is sold and an employee continues working for the purchaser, employment is treated as continuous. Prior service with the seller counts toward termination notice, vacation entitlements, and other ESA calculations. BC courts also frequently credit prior service in common law reasonable notice calculations where employment continued seamlessly and the employee's role remained substantially the same.
Can I be required to sign a new employment agreement when a business is sold in BC?
A purchaser can offer a new employment agreement as a condition of continued employment. However, signing without legal advice is risky. New agreements often contain terms that reset your service, cap your future notice entitlement at ESA minimums, or alter other material terms. Where a new agreement is offered, get it reviewed before signing particularly any termination clause and any provisions that address prior service recognition. Continuing to work without signing generally preserves your continuity rights.
How does BC differ from Ontario when a business is sold?
Both BC and Ontario have ESA continuity provisions for asset sales where employment continues. However, BC courts have been somewhat more willing than Ontario courts to credit full prior service in common law reasonable notice calculations following an asset sale particularly where employment was seamless, the role remained substantially the same, and the purchaser benefited from the employee's experience. This makes total severance exposure in BC asset sales potentially greater than a comparison of ESA minimums alone would suggest. Each transaction must be assessed on its specific facts.
What if I am terminated rather than offered continued employment when a business is sold in BC?
Where you are terminated at the time of a business sale rather than offered continued employment, your termination pay should reflect your full length of service including any period recognized under Section 97 continuity. Common law reasonable notice calculated on your age, total service, position, and job market conditions may significantly exceed the ESA minimum. If the severance offered does not reflect your full entitlement, you may have a wrongful dismissal claim for the difference. Get legal advice before accepting any offer or signing a release.
Questions about your rights or obligations in a BC business sale?
Our team advises both employees and employers across BC on employment law consequences of business sales, continuity rights, and wrongful dismissal claims. Contact us for a confidential consultation before the transaction closes or before you sign anything.
Call us at 1-800-771-7882 or fill out the form below and we will be in touch.
The article in this client update provides general information and should not be relied on as legal advice or opinion. This publication is copyrighted by Achkar Law Professional Corporation and may not be photocopied or reproduced in any form, in whole or in part, without the express permission of Achkar Law Professional Corporation. ©