Asset Sales and Human Rights Liability

The sale of a business through an asset transaction is often structured to limit the liabilities assumed by the purchaser. In employment law, this distinction has long been significant. In human rights law, however, the analysis is different. The cases show that liability does not turn on the form of the transaction, but on the reality of the employment relationship and the conduct surrounding it.

The starting point: Brandt Tractor Ltd. v. Morasse

The Ontario HRT decision in Brandt Tractor Ltd. v. Morasse illustrates the issue in a straightforward way. An employee on maternity and parental leave was not included in the transition when the business was sold. The Tribunal found that her exclusion was discriminatory, and the Divisional Court upheld that conclusion. ¹

The claim was brought against the vendor employer. The breach arose from the failure to ensure that the employee, although absent on protected leave, was treated equally in the transition process.

The case confirms that an asset sale does not relieve the employer of its obligation to ensure non-discriminatory treatment of employees, including those who are not actively at work at the time of the transaction.

The limits of transactional form

In a traditional employment law analysis, an asset sale allows the purchaser to choose which employees to hire. The vendor’s employment obligations may end with the termination of employment.

Human rights law does not adopt this formal approach. The focus is not on whether the employment relationship technically ended, but on whether the process by which employees are selected or excluded produces discriminatory effects.

The issue is one of impact. If the transition process disadvantages an employee because of a protected ground, the form of the transaction does not provide a defence.

Liability of the vendor

The vendor may be liable where it fails to:

• identify employees on protected leave
• ensure that they are considered in the transition
• prevent discriminatory exclusion

This was the basis of liability in Brandt. The employer could not rely on the asset sale to justify the omission.

Liability of the purchaser

The cases also show that liability may extend to the purchaser.

In Garbett v Fisher Controls International LLC, ² the OHRT examined the role of the purchaser in selecting employees following a sale. Where the purchaser effectively controls the hiring process, its decisions are subject to human rights scrutiny.

The purchaser cannot:

• limit hiring to active employees
• ignore those on protected leave
• adopt criteria that produce discriminatory exclusion

In such circumstances, the purchaser may be directly liable for the discriminatory outcome.

Shared or concurrent liability

Human rights law recognizes that more than one party may be responsible for a discriminatory result.

The principle is reflected in Central Okanagan School District No 23 v Renaud, which confirms that multiple actors may share responsibility for discrimination.

Applied to an asset sale, this means that both the vendor and purchaser may be liable where:

• the transition process itself is discriminatory
• each party plays a role in producing the adverse outcome

Continuing effects and successor context

Liability may also arise where discriminatory practices continue after the transaction.

In Abouchar v Toronto (City), the Tribunal recognized that ongoing discriminatory effects may engage liability even where structures or entities change.

Similarly, decisions such as Desmarais v Correctional Service of Canada emphasize that systemic practices may persist across institutional arrangements. The focus remains on the operation of the system and its impact.

The governing principle

The underlying principle is consistent with the Supreme Court’s direction in Ontario (Human Rights Commission) v Simpsons-Sears Ltd. Human rights liability is concerned with adverse impact, not formal intention or structure.

In the context of an asset sale, this leads to a functional approach. The question is not which entity is the employer in a technical sense, but who controlled or influenced the employment outcome and whether that process was discriminatory.

Conclusion

The cases establish that human rights obligations in employment survive the sale of a business. An asset transaction does not sever those obligations.

The vendor may be liable for failing to protect the rights of employees in the transition. The purchaser may be liable where it controls the hiring process and produces a discriminatory outcome. In appropriate cases, both may share responsibility.

The analysis is driven by substance, not form. Where the process of selecting or excluding employees is tainted by a prohibited ground, liability will follow, regardless of how the transaction is structured.