10 Apr 2018
Transfer of business can be a complex matter however we have outlined important points for both buyers and sellers to consider………
There are certain variations which can occur between states.
When does a transfer of business occur?
A transfer of business may occur from an old employer to a new employer when the following requirements are satisfied:
- the old employer terminates the employment of an employee;
- the employee commences work with the new employer within three (3) months of being terminated by the old employer;
- the work performed for the new employer by the employee is the same or significantly similar as the work performed for the old employer;
- there is a connection between the old and new employer.
You may want to transfer employees to streamline your business or want to move your employees from multiple businesses to one entity.
Outsourcing or in-sourcing work can create a transfer of business.
Legal obligations when transferring employees
The employer/s must:
- consult – refer to your industrial instrument and follow the obligations stated;
- ensure the employees agree to transfer; and
- not be transferring employees to avoid liability for entitlements.
What is a connection between employers?
There is a connection between employers when one or more of the following occurs:
- the old employer sells some or all of the businesses assets to the new employer;
- the employers are associated entities;
- the old employer outsources the work the employee does to the new employer; or
- the new employer stops outsourcing work to the old employer.
Employee entitlements on a transfer of business
When a transfer of business occurs, the new employer must recognise an employee’s service with the old employer. This becomes vital when dealing with entitlements such as: personal / carer’s leave; requests for flexible working arrangements and parental leave.
However, there are some entitlements that the new employer may not have to recognise. These may include:
- If a transfer of business results in an employee being retrenched then they may be entitled to a redundancy payment which must be reviewed against both the industrial instrument and their employment contract.
- An employee may not be entitled to redundancy pay if they reject the new employer’s job offer where the terms and conditions are similar to those of the old job, where the new employer recognises the previous service with the old employer and there would have been a transfer of employment if the employee had taken the job.
- Annual leave that accumulated with the old employer will be carried across to the new employer. However, where the employers are not associated entities, the new employer can decide not to recognise an employee’s previous service with the old employer. In this case, the old employer has to pay out the employee’s accumulated annual leave.
Long Service Leave
- Whether this is paid out, transferred or not recognised may be complex and may be affected by state legislation therefore it should be assessed on an individual basis.
- It is important to note that if an employee is transferred and then terminated by the new employer then the employee may make an unfair dismissal claim against the new employer.
Notice of Termination
- A transfer of business ends an employee’s position with the old employer. Therefore, the old employer has to give notice of termination or provide payment instead of notice.
- If a transfer of business happens before the notice period ends, then the old employer must still pay the rest of the notice period.
- If a transferring employee, who was given notice by the old employer at the time of sale, is later terminated by the new employer, then the new employer must give notice of termination and applicable entitlements must be paid.
Transfer of Personnel Records
Be aware that old employers are required under the Fair Work Act 2009 to transfer to the new employer all employment records, including but not limited to:
- Basic employment details;
- Salary or wages and any averaging information;
- Overtime details;
- Leave entitlements;
- Superannuation information and contributions;
- Individual flexibility agreements or other agreements between parties.
Remember if you are a constitutional company (eg Pty Ltd) then you must make and store employee records for seven (7) years. If you are a non-constitutional employer in Tasmania (eg sole trader) you should retain employment records ongoing.
This memo does not constitute individual or legal advice therefore to discuss or obtain direction for specific business matters you should contact us at the Centre for Australian Industry on 03 6244 8881 or email us at: firstname.lastname@example.org