In Krishnamoorthy v. Olympus Canada Inc., 2017 ONCA 873, the Ontario Court of Appeal (“ONCA”) overturned the motion for summary judgment and confirmed that the purchaser of a business’ assets (as opposed to a business’ shares) can choose to offer employment to the vendor’s employees on new terms with no additional consideration other than the offer of employment itself.

Olympus America Inc. (“Olympus America”) incorporated Olympus Canada Inc. (“Olympus Canada”) to distribute Olympus America’s products in Canada. To do so, Olympus America ended its exclusive distribution agreement with Carsen Group Inc. (“Carsen”), an unrelated business that acted as Olympus America’s exclusive distributor in Canada. Olympus Canada purchased some, but not all, of Carsen’s assets.

Olympus Canada offered Nadesan Krishnamoorthy, a former Carsen employee, employment under the terms of a written employment agreement which were substantially similar to Mr. Krishnamoorthy’s employment contract with Carsen, with a few notable exceptions: a new termination clause and no recognition for previous service. Mr. Krishnamoorthy signed the Olympus Canada employment agreement without receiving any other compensation.

Ten years later, Olympus Canada dismissed Mr. Krishnamoorthy without cause and relied on the termination clause in Mr. Krishnamoorthy’s employment agreement. Mr. Krishnamoorthy refused the offer, arguing that the employment agreement was unenforceable because Olympus Canada had failed to provide Mr. Krishnamoorthy with consideration for altering the terms on which Carsen had employed him. Mr. Krishnamoorthy argued that his employment was continuous under s. 9(1) of the Employment Standards Act, 2000 (“ESA”).

Olympus Canada appealed the summary judgment award in favour of Mr. Krishnamoorthy for damages in the amount of $310,040.88.

The ONCA allowed the appeal, holding that Olympus Canada’s offer of employment constituted consideration for altering the terms Mr. Krishnamoorthy’s previous employment contract. In its reasons, the ONCA stated:

“Section 9(1) of the ESA does not deem the employment contract between an employee and an employer to bind a subsequent purchaser of some of that employer’s assets as was the case here. Nor does s. 9(1) of the ESA require the purchaser of a business’ assets to offer employment to employees of that business on the same terms as their original contracts as claimed by Mr. Krishnamoorthy.”

Key Takeaways

When purchasing business assets, if the purchasing business chooses to offer the vendor’s employees employment, the purchaser may offer employment to those employees on terms which may differ from the employees’ previous contracts of employment, and the offers of employment themselves may constitute sufficient consideration for legal purposes.