Ontario Court Decision Highlights Discrimination Risks In Asset Deals

Introduction

The recent Divisional Court decision of Brandt Tractor Ltd. v Melissa Morasse, 2026 ONSC 992 (“Brandt”), is an important reminder to both vendors and purchasers in asset transactions in Canada. The decision highlights the importance of carefully considering how offers of employment must be structured for employees who are on leave of absence at the time of the asset sale, and both vendor and purchaser obligations to employees on leave.

Background

Brandt involved an employee of Nortrax Canada Inc. (“Nortrax”), Melissa Morasse, who was on a maternity/parental leave of absence when Nortrax sold its assets to Brandt Tractor Ltd. (“Brandt”) and ceased operations. In addition to purchasing the assets of Nortrax, Brandt hired roughly 95% of Nortrax’s 650-person workforce; however, it did not contact, interview, or offer employment to any employees who were on leave of absence at the time of the acquisition, including Ms. Morasse.

Ms. Morasse brought an application to the Human Rights Tribunal of Ontario (the “Tribunal”) alleging that both Brandt and Nortrax discriminated against her on the basis of sex and family status. She alleged that Brandt’s hiring process excluded employees on leave, thereby resulting in unfair treatment based upon a protected ground of discrimination under the Human Rights Code (the “Code”). The Tribunal heard Ms. Morasse’s application in 2025 and agreed with her allegations, finding that both Brandt and Nortrax discriminated against her on the basis of sex and family status by excluding her from the hiring process because she was on a leave of absence at the time of the asset sale.

Important to the Tribunal’s findings was Brandt’s hiring process, as it used a “cascade approach” by first hiring Nortax’s high-level manager, and then involving those managers in the decision to hire other Nortrax employees into the right roles at Brandt. Brandt also obtained Nortrax’s human resources files prior to making its hiring decisions, and the Tribunal found that there was a high level of cooperation between Nortrax and Brandt in this process. Based on these findings, the Tribunal rejected Brandt’s arguments that it had no knowledge of Ms. Morasse’s protected status.

Following the Tribunal’s decision, Brandt brought an application for judicial review seeking to set aside the decision. In its recently released decision, the Divisional Court denied the application and upheld the Tribunal’s decision. The Divisional Court found that Brandt’s hiring process treated Ms. Morasse unfairly because she was on maternity/parental leave, discriminating against her on the basis of sex and family status. The Divisional Court upheld the Tribunal’s award of $50,000 to Ms. Morasse and ordered Brandt to pay an additional $20,000 in cost.

Takeaway for Employers

In addition to upholding the Tribunal’s finding of discriminatory conduct, the Divisional Court also rejected Brandt’s arguments that it was not a proper party to the application because it was never Ms. Morasse’s employer and was instead a successor employer, which the Code does not contain provisions for. The Divisional Court found that Brandt’s role as a successor employer was irrelevant to the finding of discrimination, as it was its own hiring process that was found to be discriminatory, and the Code applies to an organization’s hiring process regardless of whether it is a successor employer.

This ruling is an important reminder for purchasers in asset transactions who are hiring employees of the vendor: the Code will apply throughout a purchaser’s hiring process and will apply to employees regardless of whether they are eventually offered employment, and despite the fact that it is the vendor who is ultimately responsible for terminating the employment of employees who do not receive offers.

The Divisional Court’s decision also emphasized that equal treatment can still result in discriminatory conduct and that employers have a duty to ensure that employees who are away on protected leave are not treated adversely as compared to employees who are actively working. This duty includes an obligation to inform employees on protected leave of anything that could result in a significant change to their employment, such as a sale of the employers’ assets. While many employers will often refrain from contacting employees who are on leave so as to not interfere with the leave itself, this decision serves as an important reminder that some communications are still necessary, particularly regarding significant changes to their employment.

This case therefore serves as an important reminder to purchasers in asset sales of the discrimination risks that can arise when hiring the vendor’s employees. While purchasers will often approach asset transactions with the view that they can pick and choose the vendor’s employees, that process must still be done in a non-discriminatory manner with appropriate consideration given the employees on protected leaves of absence. Applying a blanket hiring process or only agreeing to hire employees actively working at the time of the sale will create significant discrimination risks for both parties.