Jul

19

Transfer of Business

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Transferring a Business

When a business is transferred, the transferee or buyer may be bound by certain awards, agreements or other transferable instruments. It is important that all parties are aware of their binding obligations in relation to employees and their rights and entitlements.

 

What is a transmission of business?

This occurs when employee’s agreements are terminated with their employer (or the employee resigns) and within 3 months are reinstated with a new employer upon the business changing hands. Some form of connecting agreement must exist between the old and new employers, usually in the form of a contract of sale of business.

This is not an automatic process – there has to be an offer and acceptance of employment with the new employer.

 

What is a transferable instrument?

Fair Work Australia has identified the following examples of a transferrable instrument:

  • an agreement (an enterprise agreement approved by Fair Work Australia, a collective agreement, a preserved individual or collective state agreement, an Australian Workplace Agreement, an Individual Transitional Employment Agreement, a certified agreement made before 27 March 2006, and an old industrial relations agreement)
  • a workplace determination
  • an award
  • a notional agreement preserving a state award (NAPSA)
  • a named employer award (a modern award that commenced on 1 January 2010 that expressly covers one or more named employers)
  • preserved redundancy provisions (in certain circumstances, if the transfer occurred before 31 December 2009)
  • individual flexibility arrangements
  • guarantee of annual earnings

A new employee may also be covered by a transferable instrument if they perform the same work as a transferring employee, and no other agreement or modern award otherwise applies to them.

Fair Work Australia has the ability to make determinations on what constitutes a transferable instrument.

 

Employee entitlements

Generally, these entitlements (such as accrued annual leave) follow the employee, and become the responsibility of the new employer. However, the new employer may choose not to recognise these entitlements if they are not an associated entity of the old employer. If this occurs, the old employer is responsible for paying the employees their accrued entitlements.

 

Employee Records

The Fair Work Act 2009 provides that all employee records are to be transferred to the new employer at the time a connection is made between the old employer and the new employer (i.e. transfer of assets, outsourcing of work etc).

The new employer must keep employment records for the length of time prescribed by the Fair Work Act 2009.

 

Things to consider

An employer who is involved in a transmission of business should have consideration to the following matters:

  • Any agreement or other instrument that could be considered a transferrable instrument;
  • Notice of termination provisions;
  • Redundancy provisions including consultation;
  • Employee entitlements such as accrued annual leave, personal/carer’s leave, long service leave;
  • Circumstances which would exempt a transfer of employee entitlements;
  • Guarantee of annual earnings;
  • Record keeping obligations.

 

Conclusion

The transmission of a business can be complex, and it is important not to overlook any obligations owed to existing employees and their entitlements.

If you have any queries or require any advice in relation to a transfer of business, or any other employment law matter please contact Tony Pattinson at Ferguson Cannon Lawyers.

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Category: Business & Corporate Services, Employment Law, Fact Finders, General

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