Transmission of Business


Transmission of Business

It is not unusual for a business to be purchased by another business, but what happens to employees entitlements and periods of service if this Transmission of Business occurs.

Section 307 of the Fair Work Act 2009 (The Act) encompasses such situations where a business is transferred from one national system employer (for example, a company) to another national system employer (another company). When this occurs, it is likely the prevailing ‘industrial instrument’ (whether an award, agreement or workplace determination) follows the transfer of business and thus is binding upon the new employer.

For a ‘transfer of business’ to occur, all of the following requirements under section 311 of the Act must be satisfied:

  • The employment of an employee of the old employer is terminated;

  • Within three months after the termination, the employee becomes employed by the new employer; and

  • The work the employee performs for the new employer is the same, or substantially the same, as the work they performed for the old employer.

Further, at least one of the following connections exists between both employers:

  • An arrangement that the new employer owns or has use of some or all of the old employer’s assets that relate to the transferred work;

  • The work the employee does is outsourced by the old employer to the new employer;

  • The work previously outsourced is insourced; and

  • They are associated entities within the meaning of section 50AAA of the Corporations Act 2001.

If a transfer of business meets the above requirements, the new employer is compelled to recognise some, but not all, of the employee’s entitlements.

The employee’s period of service with the old employer must be recognised for the purposes of:

  • Personal/carer’s leave

  • Requests for flexible working arrangements

  • Parental leave.

However, the new employer does not have to recognise:

  • Redundancy

  • Annual leave

  • Long service leave.

If the new employer makes this decision, the consequences are:

  • Annual leave – the old employer must pay out employees’ accrued annual leave.

  • Long service leave – the old employer must payout employees with either full or pro-rata entitlements. (Building and construction employers may need to have regard for portable long service leave entitlements, claims or limitations at this time)

  • Redundancy pay – the old employer must pay redundancy pay if it would ordinarily be payable to the employee.

There is no requirement under the Act on employers to either notify their employees of a transfer of business or inform their employees which industrial instrument will apply. However, every new employee must be given a copy of the Fair Work Information Statement before or as soon as possible after they start their new job. The statement explains the effect of a transfer of business on an employee’s entitlements. Employers should also have close regard for open communication, consultation obligations and transferring industrial instruments.

Fair-Work-Information-Statement

For queries about the transmission of business or other employment questions, please contact Dean Cameron at Workforce Advisory Lawyers – We Know Employment Law on 1300 925 529, 0417 622 178 or via email to dean.cameron@workforceadvisory.com.au

Disclaimer: This information is provided as general advice on workplace relations and employment law. It does not constitute legal advice, and it is always advisable to seek further information regarding specific workplace issues. Liability limited by a scheme approved under professional standards legislation.

 

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