Toronto Employment and Labour Blog: Sure Signs You Are About To Be Fired - Sign #7

SIGN #7 - THE TAKEOVER TRAP

The company is being sold. You receive a letter that on completion of the sale all employment will be terminated, but it is expected the purchaser will rehire.

A major hotel operation was sold to a large hotel chain. The purchaser informed the hotel staff that their employment would come to an end when the sale was complete, but that most of them would be hired back on the same or similar terms by the purchaser. Individuals did not know whether they or their associates would be rehired. Older employees, like the executive chef and the hotel manager, each of whom had spent 24 years at the hotel, did not know whether they would be included among the rehires. Even those lucky enough to be rehired did not know whether, in their new employment, their past service would be acknowledged for the purpose of severance or pension.

In theory, the executive chef might be rehired and within six months fired without payment appropriate to his 24 years’ service, but rather for a small payment of two weeks' severance or notice reflecting only his six-months' employment with the purchaser. All the employees were informed that if they wanted a job with the purchaser, they would be starting anew and could not rely on their years of service with their former employer for any purpose.

It was as a result of the intervention of an employment lawyer hired by the hotel staff that the terms of the purchase and sale were renegotiated. The seller hotel agreed that those employees not rehired would receive severance based on their years of service and level of responsibility. Those hotel employees fortunate enough to be offered continued employment would be entitled to have their future calculation of notice or severance on termination based upon their cumulative service from both their prior and present employer. As part of the deal, the new purchaser agreed to pay the legal fees incurred by the seller's employees.

It is unfair and contrary to public policy to force long-term employees to change employers and by doing so lose their accumulated service and benefits. Either their employment must be terminated and their rights addressed at the time of purchase and sale or part of the new hire arrangements must include the crediting of past service for the purpose of the new hire.

Tales of employers who attempt this maneuver abound as do stories of employers who loot pension funds accumulated by senior employees. Such tactics, although not unusual, are frowned upon by the courts. Remedies do exist. Sometimes proceedings must be commenced or at least credibly threatened before a large organization, bent on cutting costs, will realize that attacking employees' accumulated service and savings is just an inappropriate way to reduce expenditures. Such a tactic may not only cost the purchaser more in the long run, but the attempt to short-change employees will inevitably destroy their morale and often result in negative publicity if the impact of this strategy is picked up by the media.

Most employers attempt to handle these situations fairly. But there are the few who will attempt to cut a deal without considering the impact on the employees. However, the long-term consequences of such inequitable treatment is inevitably more costly that corporate purchasers realize.

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