An employer is not given the right of assignment of the employment contract at common law. Absent a specific term in the agreement which allows the employer this right, there can be no assignment.
This issue was reviewed by the New Brunswick Court of Appeal in the 2001 decision of H.B. Hotels v Stone. Robertson J.A., in concurring reasons, made the following observation. The case involved an issue of the statutory interpretation for which the common law was contextually relevant.
Contracts of personal service contemplate that the person employed has been selected with reference to his or her individual skill and qualifications. Therefore, it is essential to the employment contract that the employer is entitled to personal performance. Thus, the law holds that an employee cannot assign a contract of personal service by supplying the employer with a substitute worker. Similarly, an employer is not entitled to assign an employment contract to a successor employer, but for a different reason. Simply put, the law is not willing to perpetuate the belief that employers are entitled to create a marketplace in which workers may be bought and sold as was done in this Province until the first half of the 19th century. Today, there are no advocates for slavery and the law cannot afford to countenance the perception that such a practice exists. Accordingly, the common law does not permit an employee to be transferred from one employer to another, unless the existing contract of employment is terminated and replaced with a new contract between the employee and the new employer.
[11] As there can be no assignment of an employment contract at common law, the sale of a business, as opposed to a sale of corporate shares, automatically terminates all employment relationships.
[12] In order for an employee of the vendor to become an employee of the purchaser, there must be clear evidence that that employee has agreed to become the employee of the purchaser. The converse is also true. There must be clear evidence that the purchaser of the business agreed to retain the employee’s services. In the absence of mutuality, the employee of the vendor is restricted to suing the vendor for wrongful dismissal. Correlatively, as the purchaser of the business is under no obligation to rehire the vendor’s employee, the purchaser is not subject to a suit for wrongful dismissal.
[13] I should point out that it makes no difference whether the transfer of the business occurs by agreement or by operation of law. With respect to the latter possibility, it is instructive to note that even if a company is dissolved and its assets transferred, pursuant to a court order, there can be no assignment of individual employment contracts: see Nokes v. Doncaster Amalgamated Collieries Ltd., [1940] A.C. 1014 (H.L.) and, generally, G. England & R. Wood, Employment Law in Canada, looseleaf (Toronto: Butterworths, 1998) at 3.6.
To the same end is the Ontario decision of the late Justice Steele in Addison v M. Loeb, a 1984 case. The Court of Appeal affirmed this principle, although it reversed on unrelated issues in the determination of the common law notice period. The trial judge stated:
A contract of employment is a personal contract and cannot be assigned without the consent of the parties and I adopt the reasoning as stated in White v. Stenson Holdings Ltd.; David Thompson Motor Inn Ltd. et al. (third parties) 1983 CanLII 447 (BC SC), (1983), 22 B.L.R. 25 at p. 30, 43 B.C.L.R. 340, as follows:
In principle, as we deal with a contract of employment for personal service, such contracts cannot be assigned without the consent of the parties. Where a business is sold as a going concern, the law is stated in Collier v. Sunday Referee Publishing Co., [1940] 2 K.B. 647, where Asquith J. held that where the defendant sold a newspaper and put it out of its power to further employ the plaintiff, it destroyed the position to which they had appointed the plaintiff and committed a breach of contract for which it was liable to pay damages.
Accordingly, the parties should pay heed to the issue of an assignment and what terms, if any, should be met for an assignment to be made. In addition, even if the contract is silent on the right of assignment, the employee’s refusal to accept what may be a comparably attractive position will raise mitigation issues, which should be addressed when the contract is made. Barring a contractual term to resolve such an issue, even without an assignment term, the employee may be deprived of a damage claim due a failure to mitigate, all other factors being neutral. The statutory claim would survive.
The issue of mitigation is somewhat complicated. It is reviewed in depth here. In certain situations, such as an asset sale as opposed to a share sale, the employee will always be entitled to the minimum statutory sums even if there is a comm0n law duty to accept the new position.