Human rights in asset purchases
Exclusive to Canadian HR Reporter from Rudner Law.
When you are rushing to pack for a last-minute vacation, you’re almost guaranteed to forget something essential like your phone charger.
When employers rush an asset transaction — the purchase of a business by acquiring its assets rather than its shares — they won’t forget their charger but they might forget their human rights obligations.
As a recent Ontario Divisional Court decision confirms, leaving employees on protected leaves behind during an asset transaction is a mistake that will cost you a lot more than a new charger at the airport.
Family status discrimination
In the unpublished decision Brandt Tractor Ltd. v. Morasse, 2026 ONSC 992, the employer learned this the hard way. The case involved Nortrax Canada Inc. selling substantially all of its assets to Brandt Tractor Ltd. in an expedited transaction that closed in fewer than three months.
Brandt took on almost all of Nortrax’s existing workforce, hiring 620 out of 650 employees.
However, Brandt did not contact, interview or offer positions to any employee who was currently on a leave of absence. One of those employees was Melissa Morasse, who was on parental leave.
Since Brandt did not hire her, Nortrax terminated her employment; the termination letter specifically noted it was because Brandt was not offering her a position. The Human Rights Tribunal of Ontario (HRTO) found that Brandt had discriminated against Morasse based on sex and family status. The Divisional Court upheld that decision on appeal.
The ‘not my employee’ defence
Brandt tried to argue that it shouldn't be liable because it was just the successor employer and never actually employed Morasse. The court didn't buy it.
Brandt wasn't a passive bystander; it was directly and actively making hiring decisions about Nortrax staff; Brandt had access to Nortrax's HR files, consulted with local managers, and made the decision to exclude people on leave from its interview process.
The court found that Brandt's discriminatory hiring practices grounded its liability, not its status as a successor employer. This was important because past HRTO decisions had limited the ability to add successor employers to human rights applications.
Identical vs. equitable treatment
Brandt also tried to rely on the fact that its policy wasn't specifically targeting employees on certain leaves, such as parental leave. It was a neutral policy applied identically to everyone on leave, largely due to the rushed business timeline.
The court rejected this argument, pointing out that the Supreme Court of Canada has long recognized that identical treatment can be discriminatory, such as a uniformly applied rule that impacts individuals on protected leaves. Furthermore, Brandt admitted that it didn't interview Morasse because she was on leave and "not immediately available". Therefore, the court found a clear causal link between Morasse’ leave and Brandt’s hiring decision.
The court reiterated an important HR takeaway: a protected ground only needs to be a factor in the discriminatory decision, not the sole factor.
Pith and substance
Brandt is a stark reminder that human rights obligations are not suspended just because an employer is going through a fast-paced transaction. Purchaser employers cannot dump their human rights obligations onto the vendor, and they certainly cannot hide behind a tight transaction timeline to justify a uniform policy that discriminates against employees on protected leaves.
Brandt was hit with over $50,000 in damages, mandatory HR training, and hefty litigation costs. The good news for employers is that these are entirely avoidable costs. When navigating a transaction, it is crucial that human rights obligations are considered and reflected in the transaction agenda. Always engage HR counsel early in the process to review the proposed transaction, assess any exposure, and get advice on how to mitigate risk and minimize costs.
David Gelles is an associate lawyer at Rudner Law in Toronto. He can be reached at (416) 864-8500 or [email protected].
