The sale of a business through an asset transaction is commonly structured to limit the liabilities assumed by the purchaser. In conventional employment law, the distinction between an asset sale and a share sale may be significant.

Human rights law presents a different issue.

An asset purchaser does not automatically inherit the vendor’s human rights liabilities merely because it acquires the business. It may nevertheless incur direct liability for its own conduct where it participates in deciding which employees of the vendor will be offered employment following the transaction.

This issue was considered directly in Morasse v. Brandt Tractor Ltd., 2025 HRTO 1401, a decision subsequently upheld by the Ontario Divisional Court in Brandt Tractor Ltd. v. Morasse, 2026 ONSC 992.

The Asset Purchase

Morasse had been employed by Nortrax Canada Inc. for approximately five years. She commenced maternity leave in September 2019.

At approximately the same time, Brandt Tractor Ltd. agreed to purchase substantially all of Nortrax’s assets.

The transaction proceeded rapidly. Brandt visited Nortrax locations and undertook a process to determine which of approximately 650 Nortrax employees would be offered employment following the acquisition.

Brandt ultimately hired all but approximately 30 of these employees.

Morasse was not considered.

Nor were employees who happened to be away from work on leave during the selection process. Such employees were not contacted, interviewed or offered employment.

Morasse’s maternity and parental leave consequently removed her from the hiring process.

When the asset transaction closed, Nortrax terminated her employment on the basis that Brandt had not offered her a position.

The Tribunal found that Morasse’s maternity and parental leave was a factor both in Brandt’s decision not to consider her for employment and in the resulting termination of her employment by Nortrax.

There was no requirement to establish an intention to discriminate. The issue was the discriminatory effect of the process.

The Purchaser Was Not Morasse’s Employer

Brandt argued that it had never employed Morasse and that the Human Rights Code did not impose successor-employer liability upon a purchaser in an asset transaction.

The argument raised an important distinction.

Brandt was not liable simply because it had purchased Nortrax’s assets.

Its liability arose from its own conduct.

Brandt had participated directly in determining which Nortrax employees would be considered for employment. It reviewed employment information, consulted with Nortrax management and participated in the selection process.

The Tribunal therefore rejected the suggestion that Brandt was merely a successor which had inherited liability for discrimination committed by somebody else.

Brandt itself had participated in the employment decision which produced the discriminatory result.

That distinction was subsequently affirmed by the Divisional Court in Brandt.

The purchaser’s status as successor organization was not the foundation of liability. Its own participation in the hiring process was.

This is an important qualification to the concept of successor liability.

An asset purchase does not automatically transfer a vendor’s human rights liability to the purchaser. A purchaser may, however, become directly liable where its own hiring or selection decisions infringe the Code.

Equal Treatment With Respect to Employment

Brandt also argued that because it had never employed Morasse, she could not assert an employment discrimination claim against it.

The argument failed.

Section 5(1) of the Ontario Human Rights Code provides a right to equal treatment “with respect to employment”. The protection is not confined to an existing employer-employee relationship.

It may therefore apply to hiring and other decisions concerning access to employment.

Brandt’s participation in determining whether Morasse would be offered employment brought its conduct within the scope of the Code.

The significance of this point extends beyond asset sales.

A purchaser conducting a hiring exercise in connection with an acquisition is making an employment decision. That decision remains subject to human rights legislation even though the individuals being considered have not previously been employed by the purchaser.

Employees on Protected Leave

The most significant factual feature of Morasse was the treatment of employees who were absent from work.

Brandt’s process effectively required employees to be available for an interview during the expedited acquisition.

Morasse was unavailable because she was on maternity and parental leave.

The Tribunal found a direct sequence.

Morasse was on protected leave.

Because she was on leave, she was not available to participate in Brandt’s interview process.

Because she was not interviewed, Brandt did not offer her employment.

Because Brandt did not offer her employment, Nortrax terminated her employment.

Her protected leave therefore need not have been the sole reason for the adverse result. It was sufficient that it was a factor.

The Divisional Court upheld this reasoning.

Ignorance of the Protected Ground

Brandt also argued that it did not know Morasse was on maternity leave.

This defence failed.

The Court concluded that Brandt knew or ought to have appreciated that a process excluding employees who were away on leave could affect persons whose absence arose from grounds protected by the Code.

Brandt had access to employment information and was actively involved with Nortrax managers in determining who would be considered for employment.

It could not avoid the potential human rights consequences of the process merely by failing to determine why particular employees were absent.

This principle is particularly important in an asset transaction.

The purchaser need not necessarily be given an employee’s detailed medical or other confidential information. It does, however, need a process which identifies employees whose absence may engage a protected ground and ensures that their absence does not exclude them from consideration.

Treating Everyone on Leave the Same

Brandt submitted that its process was neutral because all employees who were away from work were treated in the same manner.

That argument also failed.

Human rights law has long recognized that identical treatment does not necessarily produce equal treatment.

A rule that excludes everyone who is absent from work may appear neutral. Its effect may be very different where an employee is absent because of maternity leave, disability leave, religious requirements or another protected characteristic.

The fact that Brandt applied the same rule to everyone on leave therefore did not make the rule non-discriminatory.

The principle is consistent with Ontario Human Rights Commission v. Simpsons-Sears Ltd., in which the Supreme Court of Canada recognized adverse-effect discrimination arising from apparently neutral rules.

The focus is upon effect, not merely form or intention.

A Tight Transaction Deadline Is No Defence

The asset acquisition in Morasse took place on a compressed timetable.

This explained why Brandt wanted a quick interview and selection process.

It did not excuse discrimination.

Commercial urgency may explain the manner in which a transaction is organized. It does not suspend the protections of human rights legislation.

An expedited transaction must therefore include procedures for employees who cannot participate in the ordinary process because they are absent on protected leave.

This may require an alternative interview, telephone or video contact, consideration of existing employment information or another means of ensuring that the employee receives meaningful consideration.

The important point is that absence on protected leave cannot simply become a proxy for exclusion.

Liability of the Purchaser

The purchaser’s potential exposure following Brandt can now be stated more precisely.

The purchaser is not liable merely because it acquires the assets of an employer which has human rights obligations to its employees.

Liability may arise where the purchaser itself:

• establishes the criteria by which employees will be selected;
• participates in determining which employees will receive offers;
• excludes employees because they are absent on protected leave;
• applies apparently neutral criteria which produce discriminatory effects; or
• fails to consider readily available information showing that an employee’s absence may engage a protected ground.

The liability is direct.

It arises from the purchaser’s own employment-related conduct, not from an automatic transfer of the vendor’s liabilities.

Liability of the Vendor

The vendor also remains responsible for its own conduct.

In Morasse, Nortrax terminated the employee after Brandt failed to offer her employment. The Tribunal found that the maternity and parental leave was a factor both in Brandt’s failure to hire and in the resulting termination.

The vendor cannot simply assume that the purchaser’s selection process complies with human rights legislation where the vendor itself participates in that process or acts upon its result.

Particular care should therefore be taken with employees who are away from the workplace at the time of the transaction.

A proper transition process should identify employees on maternity or parental leave, disability leave and other forms of protected absence and ensure that they are not inadvertently omitted from the process.

Concurrent Responsibility

An asset transaction frequently involves coordinated decisions by purchaser and vendor.

The purchaser may determine whom it wishes to employ.

The vendor may provide personnel information, recommend employees, facilitate interviews and ultimately terminate employees who do not receive offers.

Where both parties participate in a process which produces a discriminatory result, human rights liability need not necessarily be confined to one of them.

The issue is not simply which party bears the conventional contractual employment obligation.

The question is what each party actually did and whether its conduct contributed to the discriminatory outcome.

This functional approach is consistent with the general principle in Central Okanagan School District No. 23 v. Renaud that responsibility for compliance with human rights obligations may, depending upon the circumstances, extend to more than one participant.

The Remedy

The Tribunal awarded Morasse compensation for lost income following deduction of mitigation earnings.

She was also awarded $20,000 for injury to dignity, feelings and self-respect, together with interest.

Brandt was additionally required to ensure that members of its human resources department completed human rights training.

The discrimination findings were subsequently upheld on judicial review in Brandt Tractor Ltd. v. Morasse, 2026 ONSC 992.

The Governing Principle

The importance of Morasse is not that human rights liabilities automatically follow the assets from vendor to purchaser.

They do not.

The more precise principle is that an asset transaction does not insulate either party from liability for its own discriminatory conduct in the employment transition.

The commercial structure of the transaction may determine who owns the business and which contractual liabilities are assumed.

It does not determine whether an employment selection process complies with human rights legislation.

The relevant questions are functional.

Who determined which employees would be considered?

What criteria were used?

Which employees were excluded?

Why were they excluded?

Was a protected characteristic a factor in the adverse result?

Did either party have information which should have alerted it to the human rights implications of the process?

These questions determine the human rights issue.

Conclusion

An asset sale does not create an automatic transfer of human rights liability from the vendor to the purchaser.

Nor does it create a human rights vacuum.

The vendor remains responsible for its own conduct toward its employees. The purchaser becomes responsible for its own conduct when it participates in hiring, selection or other employment decisions associated with the transaction.

Morasse demonstrates that this responsibility extends to employees who are absent on protected leave.

A purchaser cannot safely limit its hiring process to employees who happen to be physically present and available for interview. A vendor cannot ignore the discriminatory consequences of a transition process in which it participates.

The governing principle is therefore one of substance rather than transactional form.

A legitimate asset sale may explain why employment decisions must be made. It does not exempt those decisions from human rights law.