What is a non-competition agreement?
A non-competition agreement prevents the seller from opening the same or similar business within a specific period of time and within a geographical location.
What are employees’ liabilities?
Employees’ liabilities refer to the employees’ work history, vacation pay, termination pay, and severance pay entitlements that are transferred to a purchaser upon a purchase and sale of a business.
How do I protect myself from assuming employee liabilities when purchasing a business?
A purchaser can protect himself from assuming employees’ liabilities if the purchase agreement has provisions whereby the seller terminates all of the employees with the business prior to the closing date. The purchaser will require that the seller pay the employees all their statutory rights in respect of this termination, such as termination pay, severance pay and accrued vacation pay. Then, the purchaser will offer employment to the employees on substantially the same terms as the previous employment.
What happens to employees’ contracts after the sale of a business?
If the employer has terminated an employee’s contract as part of the negotiations in a purchase or sale agreement, the employer must pay the employee any severance pay, termination pay, and accrued vacation pay to which the employee is entitled. Due to the substantial cost, the vendor may raise the selling price to compensate for the expense.
