CHRL Law Practice Exam

When ownership of a business changes hands, the employment relationship is with the employer entity, not with the individual owner. If the purchaser hires an employee of the seller after the sale, that creates a new employer–employee relationship under a different legal entity. To formalize this change and ensure the terms of employment (wages, hours, benefits, notice, etc.) are properly set under the new employer, a new contract is typically required. This protects both the employee’s rights under the ESA and the purchaser’s obligations as the new employer. So, even though the employee may continue working after the sale, the formal agreement with the new employer needs to be created to reflect the change in who is responsible for terms and compliance. The other options imply either automatic termination or no change in status, which aren’t the standard approach when a new owner steps in as the employer.