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Continuity of Employment

  • ISBN: 978-1-4606-1988-9 (HTML)
  • ISBN: 978-1-4606-1987-2 (Print)
  • ISBN: 978-1-4606-1989-6 (PDF)
  • Revised: May 2013
  • Content last reviewed: May 2013
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This guide is provided for your information and convenience only. It is not a legal document. For complete information, refer to the Employment Standards Act, 2000 and its regulations.

The purpose of the continuity of employment provisions of the Employment Standards Act, 2000 (ESA) is to ensure that an employee retains certain rights when:

  • the business the employee works for is sold or transferred in any other way to a new owner;
    and
  • the employee continues to work in the business for the new owner.

It also applies to an employee of a building services provider when:

  • the employer no longer holds the contract at the building where the employee works
    and
  • the employee is hired to work for the new provider at the same location.

Building Services Provider

This is a person or company that provides cleaning, security, or food services for a premises. A building services provider can also provide property management, parking garage, parking lot and concession stand services related only to the building, its occupants and visitors. A building services provider includes the owner or manager of a building if that owner or manager provides these services to a building that they own or manage.

The ESA also has specific provisions that apply only to building services providers and their employees. (See the “Building Services Providers” chapter for more information.)

Determining Entitlement to Rights and Benefits

Most employees are entitled to earn such rights as vacations, pregnancy and parental leaves, termination and severance pay. However, they are not eligible to receive them until they have worked for an employer for a certain minimum time, which varies according to each kind of right. The continuity of employment provisions provide that a person's length of employment with the seller of a business or a previous building services provider is attributed, or "flows through" to the purchaser of the business or to the new building services provider. This means that an employee's entitlement to rights that are based on length of employment are unchanged, despite the sale of the business or the change in building service providers.

When a person's length of employment is attributed to a new employer, the new employer has to recognize the time the person worked for the previous employer. This "earned" time must be credited toward any rights the employee has that are based on his or her length of employment.

When a business is sold

Richard has worked for 10 years as a mechanic. His employer, Kim, decides to retire and sell the garage to her son, who chooses to continue to employ Richard. Richard wants to carry on working in the business, and he accepts the job with the new owner.

Because Richard's employment does not end with the transfer of the business, the length of time he worked for Kim must be recognized for any rights he has that are based on his length of employment.

When part of a business is sold

Talia works for a dairy that produces milk and ice cream. The dairy sells the ice cream division so that it can concentrate on milk production. The buyer offers to continue to employ Talia, and she agrees to work for the new owner.

Talia's employment does not end with the sale. The total time Talia was employed by the business must be taken into account when determining any rights Talia may have with the new employer.

When a building services provider is replaced

Xiu has worked for two years for ABC Cleaning. Her employer has a contract with a building owner to provide cleaning services in the owner's building. The contract is for a specific period of time, and when it expires the owner contracts with a new company, DEF Cleaning.

Xiu is hired by DEF Cleaning and continues to work in this building. In hiring her, DEF Cleaning must recognize Xiu's length of employment with ABC Cleaning for any rights she has that are based on her length of employment.

When a service is contracted to a building services provider

Jim has worked for MNO Insurance for six years as a cleaner. His job is to keep MNO's office building clean. MNO decides to contract this service to a cleaning company, GHI Cleaning. GHI Cleaning chooses to hire Jim, and he continues working in the building.

Jim's length of employment with MNO is included when determining his length of employment with GHI.

Continuity of Employment and Entitlements to Vacation Time and Pay

Under the ESA, an employee earns two weeks of vacation time once he or she has completed a 12-month vacation entitlement year and 4% of the gross wages earned in that entitlement year are accrued as vacation pay. The employer must ensure the vacation is taken no later than 10 months after the vacation entitlement year ends and generally, the vacation pay accrued in respect of that vacation entitlement year is due at that time. (See When to Pay Vacation Pay).

When a business is sold

Steph has worked for a business for 16 months when the business is sold. He has not taken any vacation at the time of the sale. Steph continues to work for the new owner, and his previous employment with the seller must be recognized by the new owner. The new owner must give Steph the vacation he earned in his first 12 months of employment with the seller within six months of hiring him. In addition, the purchaser must pay Steph the vacation pay accrued in respect of that vacation entitlement year (if it has not yet been paid). The purchaser will also be liable for the vacation pay Steph accrued in the last four months of employment with the seller, if it has not yet been paid.

When a building services provider is replaced

Matti has worked as a cleaner with a company for 38 months when the company loses its cleaning contract. He is immediately hired by the company that won the contract. The new provider must recognize Matti's employment with his former employer.

Matti has already taken two weeks of vacation for each of his first two vacation entitlement years with his former employer. His new employer must therefore give him the two weeks of vacation earned in respect of his third vacation entitlement year. The vacation must be taken within 10 months of the completion of the third vacation entitlement year (8 months after he was hired by the new building services provider).

Note: A provider who stops providing services at a premises and who stops employing an employee has to pay the employee the amount of any accrued (accumulated) vacation pay:

  • within seven days of the date the provider stops providing services to the premises;
    or
  • on the employee's next pay day;

whichever is later.

Continuity of Employment and Entitlements to Pregnancy and Parental Leave

To qualify for a pregnancy leave, a woman must have started her employment at least 13 weeks before the date her baby is expected to be born.

When a business is sold

Amy has worked for an accounting firm for three years. The firm is sold and Amy starts working for the new owner. The sale occurred four weeks before Amy's due date, and she will have started her employment with the new owner only four weeks before her baby is due.

Amy's employment with the old business is deemed to have been employment with the new owner. She is considered to have started her employment three years and four weeks before her baby is due, and she qualifies for pregnancy leave.

When a building services provider is replaced

Hannah has worked for five years in a hospital cafeteria for 123 Foods. Hannah is eight months pregnant, and she intends to begin her pregnancy leave in one month's time on the date her baby is due. However, 123 Foods is replaced by a new services provider, 456 Foods, which hires Hannah.

Because 456 Foods must recognize Hannah's years of employment with the previous provider, she is considered to have started her employment five years and one month before her due date. Hannah is entitled to pregnancy leave.

To qualify for a parental leave, an employee who is a new parent must have been employed by his or her employer for at least 13 weeks before the leave begins.

When a business is sold

Marilyn, Leigh's same-sex partner, has worked for a printing company for 13 years. Leigh gave birth six months ago. The printing company was sold when the baby was five months old and Marilyn continues to work for the new owner.

Marilyn planned to take a parental leave when the baby was seven months old. Her total length of employment with the business is attributed to the new owner. Therefore, her total length of employment is more than 13 weeks, and she is qualified for the parental leave.

When a building services provider is replaced

Raph has worked for a security services company as a security guard for three years. His employer provides security services at a local credit union. Raph and his wife Janet have a three-month-old son.

Raph planned on taking a parental leave when his son was five months old. The security services company was replaced by another company at the end of its contract, one month before Raph was planning to begin his parental leave.

Raph is hired by the new security services company. He qualifies for parental leave because the new services provider must recognize his total length of employment, which is more than the 13 weeks he needs to qualify under the ESA.

Continuity of Employment and Entitlements to Termination of Employment and Severance of Employment

In most cases, when a person's employment is going to be ended by an employer, the employee is usually entitled to receive either written notice of termination, termination pay, or a combination of both. Some employees are also entitled to receive severance pay. The length of the notice or the amount of termination pay or severance pay depends on how long the person has been employed.

When a business is sold

Janie Marie has worked for a retail chain of stores for 10 years. All of the stores have been sold to a new owner, and the new owner continues to employ Janie Marie. Six months after buying the business, the new owner decides to downsize, and Janie Marie's employment is ended.

Janie Marie's length of employment with the business is attributed to the new owner. Since she was employed with the business for 10½ years, she is entitled to receive the maximum period of written notice or pay in lieu of notice required under the ESA, in this case eight weeks.

Because Janie Marie was employed with the business for more than five years and her employer's payroll is greater than $2.5 million annually, she is also entitled to 10½ weeks of severance pay.

When a building services provider is replaced

Arnold has worked as a site supervisor for a building cleaning company, ABC Cleaning, for four years. ABC Cleaning's contract expires and it is taken over by a new services provider, DEF Cleaning. Arnold is hired by DEF Cleaning and works for them for another four years. DEF terminates his employment.

Arnold is entitled to either eight weeks' written notice of termination of employment or eight weeks' pay in lieu of notice from DEF Cleaning. This is because DEF Cleaning must recognize his length of employment with the previous employer.

Arnold may also be entitled to severance pay if DEF Cleaning's payroll is more than $2.5 million or more than 50 employees have their employment ended within a six-month period as a result of a permanent discontinuance of all or part of DEF Cleaning's business at an establishment.

Exception: 13-Week Gap in Employment when there is a Sale of Business

Where there has been a sale of a business, an exception to the continuity of employment provision occurs if there is a 13-week gap in employment.

A person's employment with a previous employer is not deemed to have been employment with the new owner if the employee is hired by the new owner more than 13 weeks after either the employee's last day of work with the seller or the day of the sale, whichever is earlier.

When an employee is hired more than 13 weeks after stopping work with the seller

John works for Rick & Fred Taxis which is having financial difficulties. His employment is ended by the owners and, 10 weeks later, the business is sold to a new owner, Tamarack Taxis. Tamarack Taxis does not immediately offer to hire John.

After eight weeks, the new owner realizes that he needs more staff. He calls John and asks him to return to his old job. John does, but his employment with the previous owner is not attributed to Tamarack Taxis because he was hired more than 13 weeks after his last day of employment with the previous owner.

When an employee is hired more than 13 weeks after the day of the sale

Trevor works as the manager at Jeff's Restaurant. Jeff decides to sell the business, and Trevor works until the date the restaurant is sold. The new owner decides to manage the restaurant himself and does not hire Trevor.

After 16 weeks, the new owner realizes that he is not able to manage the restaurant as well as Trevor did, and he asks him to return to his job as manager. Trevor agrees, and he starts working again in the business.

Trevor's employment with the previous owner is not deemed to have been employment with the new owner because he was hired back more than 13 weeks after the date of the sale of the business.

Exception: 13-Week Gap in Employment when there is a Change of Building Services Providers

Where there has been a change of building services providers, an exception to the continuity of employment provision occurs if there is a 13-week gap in employment.

A person's employment with a previous services provider is not deemed to have been employment with the new provider if the employee is hired by the new provider more than 13 weeks after either the employee's last day of work with the previous provider or the day the new provider began to provide the services, whichever is earlier.

When an employee is hired more than 13 weeks after employment was ended

Maggie has worked for four years as a parking garage attendant for RST, a building services provider. RST cuts back on its staff and terminates Maggie's employment. Three weeks after her termination, a new building services provider takes over the operation of the parking garage. Three months later, the new provider hires Maggie to work as an attendant at the same parking garage.

Maggie's employment with RST is not deemed to have been employment with the new services provider because there was a gap of more than 13 weeks between the date her employment was terminated by RST and the date she was hired by the new provider.

When an employee is hired more than 13 weeks after a new provider takes over

Al works as a car jockey at a parking lot operated by the owner of an office building. Because the owner provides parking lot services to the building that it owns, it is considered to be a building services provider.

The owner decides that it wants to contract the operation of the parking lot to TUV, a building services provider. Al has been employed by the building owner for three years.

Al's employment is terminated and his last day of work coincides with the last day the lot is operated by the building owner. The next day the new building services provider, TUV, takes over the operation.

TUV does not immediately offer to hire Al. However, six months later, it hires him to work as a car jockey.

Al's employment with the building owner is not attributed to TUV because he was hired more than 13 weeks after his last day of employment with the owner of the office building (who was the previous building services provider).

Special Circumstances

Please contact the Employment Standards Information Centre, 1-800-531-5551 for further information about any of the following circumstances:

  • when a business has been taken over by a landlord due to non-payment of rent;
  • when a business has been taken over by a trustee or receiver due to a bankruptcy or receivership; and
  • when a business is a franchise operation.

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