In California, when a business is sold, it legally counts as a termination of the employees who worked for that business. This rule protects workers by ensuring they can still claim any wages or benefits owed to them, even if the business changes hands. It also will trigger an employee's entitlement to waiting time penalties if the business seller does not timely pay all earned unpaid wages when the employment terminates.
This rule applies whether or not the employees qualify for unemployment benefits. This idea comes from a key court case, Chapin v. Fairchild Camera and Instrument Corp. (1973) 31 Cal.App.3d 192. The court ruled that employees shouldn’t lose their rights just because a business is sold. Instead, the sale acts like a discharge, meaning the workers are no longer employed by the original owner. This is true even if the business, business name, storefront, uniforms, operations, job duties, and everything else stays the same as before the business sale.
This rule also lines up with California Labor Code § 2920(b), which says an employer can’t shift their obligations to a new employer (the buyer) without getting the employee’s written okay. Under common contract law, you can’t just swap who owes someone money without asking the person who’s supposed to get paid. This becomes important in what’s called a "bulk sale," which is when a business sells most or all of its assets outside the regular course of business. In those cases, it’s even more clear that employees may be left out if protections aren't followed.
In short, selling a business in California counts as ending the job for all employees—unless there’s a clear agreement otherwise. That means workers must be paid everything they’re owed when the sale happens. The buyer can’t just take over and assume the workers will go along unless the workers agree in writing. This rule keeps employers accountable and ensures employees don’t lose what they’ve earned.