Buying a Business in Alberta: Employment Law Risks
Buying a business can be an exciting opportunity for growth. It can also expose you to hidden legal liabilities, especially when employees are involved.
Many buyers focus on financials, customers, and assets, but overlook employment law obligations that can follow the business after closing. These risks can significantly increase costs and create unexpected legal exposure.
The business team at Libra Law regularly advises purchasers on how to structure transactions and identify employment risks before they become problems. Understanding these issues early can help you negotiate better terms and avoid costly surprises.
Understanding Successor Employer Liability
One of the most important concepts in Alberta employment law is successor employer liability.
Even if you purchase assets instead of shares, the law may treat you as a continuation of the previous employer. This means employees may keep their prior years of service and related rights.
In practice, this can affect:
- termination and severance obligations
- vacation entitlements
- benefits eligibility
- wrongful dismissal exposure
A long-serving employee who appears “new” to your business may legally have ten or twenty years of service.
Before closing, review your exposure with experienced employment law services in Alberta.
Severance and Termination Costs Can Be Higher Than Expected
Many buyers assume they only need to follow minimum standards under Alberta legislation. In reality, employees are often entitled to more under common law.
If terminations occur after the purchase, severance may be calculated based on total service, including time with the previous owner.
This can dramatically increase payouts.
To understand how these obligations work, review guidance on severance packages in Alberta and severance pay entitlements in Alberta.
Factoring these costs into your purchase price and negotiations is critical.
Reviewing Existing Employment Contracts
Not all employment agreements are enforceable.
Poorly drafted or outdated contracts may:
- lack valid termination clauses
- expose you to common law severance
- contain unclear compensation terms
- fail to protect confidential information
If you inherit unenforceable agreements, you may have little protection when restructuring or downsizing.
A legal review before closing can identify gaps and help you plan updates after the transaction.
Handling Employees During the Transition
Employee communication and onboarding are often overlooked during acquisitions.
Common mistakes include:
- changing roles without proper documentation
- failing to issue new agreements
- misunderstanding probation periods
- terminating staff too quickly
These missteps can lead to claims shortly after closing.
Clear documentation and legal guidance during the transition period reduce risk significantly.
Foreign Workers and Regulatory Compliance
If the business employs foreign workers, additional legal and regulatory requirements may apply.
Changes in ownership can affect:
- work permits
- sponsorship obligations
- immigration compliance
- reporting requirements
Failing to address these issues can result in fines or operational disruptions.
If your target company employs foreign staff, review the additional considerations for businesses that employ foreign workers.
Corporate Records and Due Diligence Matter
When purchasing a company, you are often inheriting its legal history.
Incomplete or poorly maintained records can hide:
- unresolved disputes
- missing contracts
- undocumented policies
- governance problems
Strong due diligence helps uncover these risks early.
You can learn why documentation is so important in the importance of corporate records in Alberta.
Structuring the Deal to Manage Risk
How the transaction is structured can significantly affect employment liability.
Depending on the situation, you may consider:
- asset vs share purchase structures
- indemnities from the seller
- holdbacks
- representations and warranties
- employee-specific agreements
Each approach allocates risk differently. Legal advice before signing any agreement helps ensure the structure matches your goals.
Support for transactions and acquisitions is available through business law services in Alberta.
Planning Before You Close
Employment issues rarely appear in spreadsheets, but they often become the most expensive part of an acquisition.
Before completing your purchase, consider:
- reviewing all employment agreements
- estimating severance exposure
- identifying regulatory obligations
- planning post-closing updates
Proactive planning protects both your investment and your new team.
If you are buying a business and want clarity on employment risks, you can reach out through the contact page to discuss your situation.
This article is for general informational purposes only and does not constitute legal advice. For advice specific to your situation, consult a qualified professional.
