The Court of Appeal for Ontario has confirmed that in an asset sale, a purchaser’s offer of employment to a seller’s employee can constitute consideration for changes in an employment contract — including a new termination clause.
The facts of this case are extremely unique. We more commonly see the courts using the doctrine of consideration to deny employers the ability to enforce restrictive termination clauses imposed after employees have already commenced working. However, the ruling gives employers hope that, if the circumstances were sufficiently extreme and an employee’s behavior egregious, the courts will apply the doctrine of consideration to an employer’s advantage.
This case is a useful reminder that in asset sales, as opposed to share purchases, the purchasing employer is not obligated to hire all the vendor’s employees.