Published 29 September 2026 · By Jatin Dua, Broker of Record, RE/MAX Quantum Realty
If you buy an Ontario restaurant and keep the seller’s staff, section 9 of the Employment Standards Act treats their employment as never having ended: their years with the seller count as years with you. That matters later, because notice of termination under the ESA grows from one week for less than a year of service to eight weeks for eight years or more, severance pay (one week per year, up to 26 weeks) applies to employees with five or more years if the employer’s global payroll is at least $2.5 million, and vacation rises to three weeks and 6 percent after five years. Service does not carry over if you hire someone more than 13 weeks after the earlier of their last day with the seller or the sale date. In a share purchase the employer does not change at all. Get a full staff list with start dates, wages and vacation owing, and have your lawyer allocate these costs in the agreement.
Why staff are part of the price
A restaurant’s trade often sits with its people: the cook who knows the menu, the server regulars ask for, the manager who opens every morning. Keeping them can protect the sales you are paying for. It also brings obligations that do not show up on the balance sheet, because in Ontario an employee’s years with the seller can follow them to you.
So staff belong in your due diligence and in your price, not only in your opening plan. They are on the list in the restaurant due diligence checklist, and for the seller’s side of the same rule see selling a restaurant with employees.
What section 9 of the ESA says
Section 9(1) of the Employment Standards Act, 2000 says that if an employer sells a business and the purchaser employs an employee of the seller, the employment is deemed not to have been terminated or severed, and employment with the seller counts as employment with the purchaser when calculating length of employment. Section 9(3) says “sells” includes leasing, transferring or otherwise disposing of the business, so it is not limited to a classic sale.
The Ministry’s guide puts it plainly: length of employment with the seller “flows through” to the purchaser, and the new employer “has to recognize the time the person worked for the previous employer.”
The 13-week rule. Under section 9(2), service does not carry over if you hire the person more than 13 weeks after the earlier of their last day with the seller and the day of the sale. It is not a planning tool: a restaurant closed for three months has usually lost the trade you paid for.
Asset purchase vs share purchase
| Question | Asset purchase | Share purchase |
|---|---|---|
| Who is the employer after closing? | You, for staff you choose to employ | The same company; only its owner changes |
| Does service with the seller count? | Yes, under ESA s. 9, if you employ them (subject to the 13-week rule) | Yes; employment never changed hands |
| Staff you do not keep | Their employment with the seller ends; the agreement should say who bears the cost | Any termination is yours, as the company’s owner |
| Past pay or vacation owing | Stays with the seller unless the agreement shifts it | Stays inside the company you bought |
Sources: Employment Standards Act, s. 9; Ontario’s ESA guide. A summary, not legal advice. Which party pays for which employee is a negotiation your lawyer should write into the agreement. The wider comparison is in asset purchase vs share purchase for buyers.
The numbers you inherit: notice, severance and vacation
Service drives three ESA entitlements. From Ontario’s ESA guide:
| Length of employment | ESA notice of termination (or pay in lieu) |
|---|---|
| Less than 1 year | 1 week |
| 1 year but less than 3 | 2 weeks |
| 3 but less than 4 | 3 weeks |
| 4 but less than 5 | 4 weeks |
| 5 but less than 6 | 5 weeks |
| 6 but less than 7 | 6 weeks |
| 7 but less than 8 | 7 weeks |
| 8 years or more | 8 weeks |
- Severance pay applies on top of notice when an employee with five or more years is severed and the employer has a global payroll of at least $2.5 million, or severs 50 or more employees in six months because all or part of the business permanently closed. It is regular weekly wages times years of service, including completed months, up to 26 weeks.
- Vacation is two weeks a year and at least 4 percent vacation pay for under five years, and three weeks and at least 6 percent from five years.
- Benefits, if any, must continue through the notice period, and vacation pay is earned on termination pay.
These are ESA minimums. An employment contract, or the common law, can give an employee more, which is one more reason to read every written contract and have your lawyer look at long-service staff.
A worked example
Round illustrative numbers, not a real restaurant. You buy the assets of a restaurant and keep a line cook who has worked there six years and earns $900 a week.
- Service counts from the cook’s original start date, so on day one with you the cook has six years.
- Vacation: three weeks a year and at least 6 percent vacation pay, not the two weeks and 4 percent a new hire gets.
- If you later ended the employment without cause, ESA notice would be six weeks, or $5,400 in pay in lieu (my arithmetic: 6 × $900), plus vacation pay on it.
- If your global payroll were $2.5 million or more, ESA severance of about six weeks would be added, another $5,400 (my arithmetic).
Across a full kitchen and floor these amounts add up. That is not a reason to let good people go; it is a reason to know the total before you set your price.
Tips, wages and the restaurant-specific rules
- Tips. The ESA guide says an employer cannot withhold, deduct from or make employees return tips, except for statutory deductions, court orders and tip pooling. You may run a tip pool without employee agreement, but an owner can share in it only if the owner regularly performs, to a substantial degree, the same work as the employees who share. Since 21 June 2024 tips must be paid in cash, by cheque or by direct deposit to an account the employee chooses. Ask how the seller runs the pool and fix anything that does not fit these rules on day one.
- Minimum wage. Ontario’s general minimum wage was $17.60 until 30 September 2026 and is $17.95 from 1 October 2026. Build the new rate into your labour cost, not the seller’s old payroll.
- Food handler training. O. Reg. 493/17, section 32, requires at least one trained food handler or supervisor on site during every hour a food service premise operates. Check who holds certificates and whether your schedule covers every shift.
- Smart Serve. The AGCO requires anyone involved in the sale, service or delivery of liquor to have completed Smart Serve training. More in buying a restaurant with a liquor licence.
What to ask for, and what to put in the offer
Ask the seller for:
- an employee list with each person’s role, original start date, hourly or salary rate, average weekly hours and any benefits;
- written employment contracts, offer letters and any policies;
- vacation time and vacation pay owing to each person, and any unpaid wages;
- how tips are pooled and paid;
- food handler and Smart Serve certificates;
- any complaints, claims or outstanding issues with current or former staff.
Then, with your lawyer, set out in the agreement which employees you will offer to employ and on what terms, who pays wages and vacation owing up to closing, and who bears the cost for anyone you do not keep. Some buyers negotiate a price adjustment for accrued service. The payroll you inherit also belongs in your valuation; the tool below tests the price against the seller’s figures.
The AI restaurant valuation tool below gives you a price range from the numbers a seller should be able to show you, so you can test an asking price before you make an offer.
Where I fit
I help restaurant buyers across Toronto and the GTA put the staff picture into the offer early, alongside the lease and licences, and I work with your employment lawyer rather than around them. For the whole sequence see buying a restaurant in Ontario step by step, and for what to walk away from see red flags when buying a restaurant in Toronto. When you have a restaurant in view, book a call or phone 833-330-1925.
Free tool — AI restaurant valuation
Restaurant valuation
What is your restaurant
actually worth?
Restaurants don’t sell on revenue — they sell on what the owner takes home, multiplied by how easy the business is to hand over. Your lease and your rent do more damage or more good than anything on the menu. This weighs all of it in about two minutes.
Reading comparable restaurant sales…
Indicative business value
—
$0$0
Most likely sale price $0 · Implied multiple 0×
Where I’d list it
$0
Comparable restaurants sell for about 85% of asking. Price to that, not to hope.
How the number is built
Your owner earnings, multiplied by what buyers pay for a business like yours — then adjusted line by line.
What the market pays
Benchmarks from completed restaurant sales.
What a buyer will ask for
- Three years of financials — statements and tax returns, not just POS reports.
- The lease, with the assignment clause and every option in writing.
- Proof of your add-backs. Lenders reject the ones you cannot document, and that is the single biggest reason deals reprice.
- Equipment list showing what is owned outright and what is leased or financed.
- Licences — AGCO, food premises, patio, and whether each one transfers.
- WSIB, HST and payroll accounts in good standing.
Want the number a buyer
would actually sign?
Send me three years of financials and your lease and I will price it properly — normalised earnings, real comparables, a defensible asking price and a confidential marketing plan that never tips off your staff or your landlord.
Frequently asked questions
Do I have to keep the staff when I buy a restaurant in Ontario?
In an asset purchase, the ESA does not force you to employ the seller’s staff. But if you do employ them, section 9 counts their years with the seller as years with you. In a share purchase the employer does not change, so the staff stay employed by the company you now own.
Does employee seniority transfer when a restaurant is sold in Ontario?
Yes, if the buyer employs the seller’s employee. Under ESA section 9, the employment is deemed not to have ended and service with the seller counts as service with the buyer, unless the buyer hires the person more than 13 weeks after the earlier of their last day with the seller or the sale date.
Who pays severance when a restaurant is sold in Ontario?
The ESA guide does not publish a single answer for staff the buyer does not keep, so it is set in the purchase agreement and reviewed by your lawyer. For staff you keep, their prior service counts toward any future notice, and toward severance if your payroll reaches $2.5 million.
How much notice do restaurant employees get in Ontario?
ESA minimum notice, or pay in lieu, is one week for under a year of service, two weeks from one to three years, then one extra week per year up to eight weeks at eight years or more. Contracts or the common law can require more.
Can a new restaurant owner change the tip pool?
Yes. The ESA lets an employer set up and change a tip pool without employee agreement, but it cannot withhold or deduct from tips beyond the permitted exceptions, and an owner can share in the pool only if the owner regularly does substantially the same work as the employees who share.
What is Ontario’s minimum wage for restaurant staff in 2026?
The general minimum wage is $17.60 an hour until 30 September 2026 and $17.95 an hour from 1 October 2026, according to Ontario’s ESA guide. The guide uses a liquor server as an example at the general rate.
Sources
- Employment Standards Act, 2000 — s. 9, sale of a business
- Government of Ontario — Your guide to the ESA: Continuity of employment — sale of a business; the 13-week rule
- Government of Ontario — Your guide to the ESA: Termination of employment — one to eight weeks' notice
- Government of Ontario — Your guide to the ESA: Severance pay — five years plus $2.5 million payroll; 26-week maximum
- Government of Ontario — Your guide to the ESA: Vacation — 4% and 6% vacation pay
- Government of Ontario — Your guide to the ESA: Tips and other gratuities — tip pools and owners
- Government of Ontario — Your guide to the ESA: Minimum wage — $17.95 from 1 October 2026
- O. Reg. 493/17 (Food Premises) — s. 32, a trained food handler on site every hour
- AGCO — Section 1: Liquor sales licences — capacity on the licence, Smart Serve, municipal letters
Related reading
- Selling a restaurant with employees (seller's view)
- Asset vs share purchase for buyers
- Restaurant due diligence checklist
- Buying a restaurant in Ontario step by step
- How much to pay for a restaurant
- Red flags when buying a restaurant in Toronto
About the author — Jatin Dua, Toronto and GTA real estate broker
I am Jatin Dua, Broker of Record and co-founder of RE/MAX Quantum Realty Inc., Brokerage, Unit 101, 799 The Queensway, Toronto. I work with buyers and sellers across Toronto and the GTA and have helped more than 100 families sell. Four-plus years of active GTA transactions and over $100 million in sales volume. Every figure here comes from a published table, regulator or statute linked in the sources, so you can check all of it without asking me.
Reach me at connect@jatindua.com or 833-330-1925, or book a call.