This article are provided for information purposes only, and are not intended as legal advice.

Buying a business are you aware of the labour laws that affect that business?

December 18th, 2009

When looking to buy a business you need to determine how large of a business do you want to purchase.  If you are buying a small retail store, there may not be any management but their may be staff.  Is the business run properly?  Are their sufficient staff or too many staff?  Many people who work in the business may be related to the former owner but they may have a different last name.  Did you ask to see if there is any related staff in the business? 


Many business owners pride themselves on staff longevity.  This is good and it is also bad.  If you are the new owner and find that the staff who have 25 years seniority is not very efficient and you would like to terminate their position, you now have to pay severance.  You will need to talk  to your labour lawyer but you may have to pay that person severance based on 25 years of sevice and not just the days, weeks or months since you took over the business.  It does not matter if you bought the assets or the shares, you may have a staff termination issue that you need to seek professional advice how that can impact you.  If you decide to relocate the business to a new facility closer to your place, is that constructive dismissal and you need to terminate all the employees?  If you purchased the assets of the business and the former business owner paid the staff additional amounts to cover potential severance, do you get credit for what that person bought?  Can you transfer the severance issues to the old owners?  That may be impossible but you may be able to have a financial arrangement where they reimburse you for some of the expenses but you may not be able transfer a labour liability that you have to another party  These may seem like very simple solutions, terminate a person or move to a new location if you lease it us but you need to comply with the labour laws in your area.


Some areas have strange labour laws.  For example if you are in the cleaning business and your employees are cleaning a high rise building in the city of  Toronto. If you own a cleaning business and just won the contract for a new building, you cannot bring in your own staff, you just inherited the employees of another business. Labour laws may vary from province to province, state to state therefore you need to know the rules in your area.


Too often, buyers of a businesses do not consider the cost of labour and the implications of acquiring employees before they buy a business.

Filed under: Buying a business — Gary Landa @ 9:54 am

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