Determining term of employment
Question: If a company purchases a business that was going under and had dismissed several employees, can it hire some of the former employees of that business to do similar jobs without it being considered an unbroken term of employment? How much time has to pass to be considered a break in employment?
Answer: Yes, the purchaser can re-hire employees of a business that went under who had been dismissed and begin a new employment relationship. The issue of whether there has been a break in service may be significant for the purpose of determining the length of the notice period if the purchaser subsequently dismisses the employee. The best approach is to firmly establish a new relationship based upon a written employment agreement which is absolutely consistent with new or fresh employment (such as a probationary period, no credit for prior service, or a waiting period for benefit coverage).
Employers should be aware of several potentially applicable provisions in employment standards legislation which prevent an employer from arguing that there is no break in employment.
First, employers must be mindful of sale of business provisions. In Nova Scotia, the Labour Standards Code contemplates that if a business is disposed of, the period of employment of an employee of the business is deemed to have been employment with the purchaser. Alberta has an almost identical provision in its Employment Standards Code). Ontario has a similar provision in its Employment Standards Act, 2000, but it does not apply if the purchaser hires the employee more than 13 weeks after the earlier of the employee’s last day of employment with the seller or the day of the sale.
Second, the layoff provisions in employment standards legislation may also be relevant if the purchaser rehires a dismissed employee. For example, the Nova Scotia Labour Standards Code defines a period of employment as including “any period on lay off or suspension of less than 12 consecutive months” and s. 77(3) states that successive periods of employment constitute one period of employment, except when successive periods of employment are more than 13 weeks apart. This does not mean that there has to be a 12-month break but the purchaser of a business must be mindful to ensure that the original dismissal cannot be framed as a layoff rather than a termination.
However, a clearly defined contract establishing that this is a new employment relationship will likely suffice in rebutting the presumption of a continuous period of service. Courts and tribunals will examine the full context of the employment relationship to determine whether there has been a break of service, the reasons for that break and whether the new employer treated the employee as a new employee or not.
For more information see:
•George v. Cowichan Tribes, 2015 BCSC 513 (B.C. S.C.).
