Employment Law Considerations When Selling Your Business

For many, the prospect of retirement is a welcome thought. Perhaps you will finally have more time to spend with your spouse, children, or grandchildren. For others, retirement is an opportunity to catch up on golf, travelling, or just plain doing nothing.

For many business owners, including professionals such as doctors, lawyers, and accountants, the means by which to finance such a retirement have often come by way of a sale of one’s business or practice. A book of business can have incredible value to a willing purchaser and certainly our firm has helped several professionals successfully sell their business.

While my colleagues in Kelly Santini LLP's business law group would be more than happy to be of service to you with respects to the legalities of such a sale, the purpose of this post is to consider the employment law considerations of selling a business; because, in addition to being a successful business owner and professional, most such individuals are also employers.

Something that most business owners fail to appreciate is that, while, for all the years that one’s loyal staff has been an asset, for potential purchasers, long-service employees can be an costly liability.

For employment-law considerations when buying a business, consider the post:
Continuity of Employment Following the Sale of a Business

This post will look at:

1. What business owners / employers need to know about the right to end employment;
2. What business owners / employers need to know about written employment contracts; and
3. What business owners / employers need to know about human rights legislation in the employment context.

The Requirement to Pay Severance in Ontario - The Decision in Paquette c. Quadraspec Inc., 2014 ONCS 2431

In a decision that will be sure to have ripple effects beyond Ontario’s borders, an Ontario Superior Court judge has ruled that for the purposes of calculating an employer’s payroll, in order to determine whether an employee is entitled to statutory severance pursuant to section 64 of the Ontario Employment Standards Act, 2000, one looks at the employer’s entire payroll, not just that of its employees in Ontario.

The case is important because under a previous line of cases, the most recent of which being Altman v. Steve’s Music, 2011 ONSC 1480 (CanLII), the court had held that it was only the employer’s payroll in Ontario that was to be considered.

For employers with operations both inside and outside of Ontario, what the case means is that even if your operations in Ontario are modest, if the company’s total payroll exceeds the statutory limits of $2.5 million dollars, employees working in Ontario may now be entitled to statutory severance pay. This decision has the potential to increase an employer’s contingent liability with respect to severance obligations by a factor of more than three!

Pardon my French: The Decision in Paquette c. Quadraspec Inc., 2014 ONCS 2431

The reasons for decision in the recently released case of Paquette c. Quadraspec Inc., 2014 ONCS 2431 (CanLII) are a necessary read for any Ontario employment lawyer.

In his reasons for decision, the Honourable Justice Paul Kane of the Ontario Superior Court of Justice sitting in Ottawa, challenges recent decisions from the Ontario courts on the issues of both contractual termination provisions and statutory severance.

The only catch? The decision is en français.

WSIAT Says Prohibition Against Mental Stress Claims is Unconstitutional

In a decision that is sure to be relied upon, scrutinized and judicially reviewed, the Ontario Workplace Safety and Insurance Appeals Tribunal (“WSIAT”) has found that the prohibition against claims by workers for mental stress to be unconstitutional.

Accordingly, in the case considered below, the WSIAT declined to apply subsections 13(4) and 13(5) of the Workplace Safety and Insurance Act, 1997, the result of which being that an employee who made a claim to the WSIB for benefits following years of workplace harassment might actually receive WSIB benefits.

Wrongful Dismissal First Principles Affirmed by ONCA

How much weight are judges to give other wrongful dismissal decisions? According to a recent decision from the Court of Appeal for Ontario, while other decisions from the same level of court can be persuasive, they are not binding. The principle of stare decisis requires that courts render decisions that are consistent with the previous decisions of higher courts.

Time Limit to Sue for LTD Benefits

How long do you have to sue an insurance company after they deny you long-term disability (“LTD”) benefits? According to a now-reversed decision from the Ontario Superior Court of Justice, if the benefits are provided as part of a group benefits plan, as most employee benefits are, it can be as little time as the insurance company says.

In a decision released in March of 2014, Kassburg v. Sun Life Assurance Company of Canada, 2014 ONSC 1523 (CanLII), the Honourable Justice M. Gregory Ellies of the Ontario Superior Court of Justice held that a group policy of insurance, issued by an insurance company to an employer, was a “business agreement” under the law and accordingly the usual limitation period governing such policies of insurance did might not apply.

However, on December 29, 2014, the Court of Appeal for Ontario reversed Justice Ellies' decision, finding that such policies of insurance are not "business agreements" and that the time limit applicable to such claims is two years from the date such claims are "discovered." For a summary of the Court of Appeal's decision see: Court of Appeal says Group LTD Policies not "Business Agreements".

Wal-Mart Rolls Back Award of Punitive Damages

In a decision released earlier this week, the Court of Appeal for Ontario reduced an award of punitive damages against a Wal-Mart manager from $150,000 to $10,000, and against Wal-Mart itself from $1,000,000 to $100,000. In the same decision, however, the court upheld the award of $100,000 in damages for intentional infliction of mental suffering against the manager, and the award of $200,000 in aggravated damages against Wal-Mart.