A recent case out of the Court of Appeal for British Columbia has confirmed that where a business is not sold as a going concern, an employee’s years of service recognition resets, regardless of whether that employee takes on employment with the successor company.

The case involved the sale of a pulp mill from one business, in the process of winding up, to another. The employee, who had over 24 years of service at the mill, was faced with the option of staying on with his employer at another work site or seeking employment with the new owner of the mill.  In choosing the latter, the employee and management negotiated a severance package which included a lump sum payment equal to 14 months salary. Several months after starting work with the new owner of the mill, the employee was terminated and received payment in lieu of one week’s notice. The employee commenced a wrongful dismissal proceeding on the grounds that the notice failed to recognize his 24 years of service.

The trial judge determined that the sale of the mill included an implied term deeming the new owner to have contracted with employees on the basis that they would be given credit for past years of service. The Court of Appeal set aside the decision, holding that an implied recognition of years of service only applies where the business is sold as a going concern.  Here, the pulp mill had ceased operation and had been decommissioned months before the new owner took over. Moreover, the employee was not entitled to notice recognizing his 24 years of service because he had already received fair compensation for it in the form of a severance package.

This article was written with the assistance of Erika Anscheutz, summer student.