Meanings of transfer of business , old employer , new employer and transferring work

             (1)  There is a transfer of business from an employer (the old employer ) to another employer (the new employer ) if the following requirements are satisfied:

                     (a)  the employment of an employee of the old employer has terminated;

                     (b)  within 3 months after the termination, the employee becomes employed by the new employer ;

                     (c)  the work (the transferring work ) the employee performs for the new employer is the same, or substantially the same, as the work the employee performed for the old employer ;

                     (d)  there is a connection between the old employer and the new employer as described in any of subsections  (3) to (6).

Meaning of transferring employee

             (2)  An employee in relation to whom the requirements in paragraphs  (1)(a), (b) and (c) are satisfied is a transferring employee in relation to the transfer of business .

Transfer of assets from old employer to new employer

             (3)  There is a connection between the old employer and the new employer if, in accordance with an arrangement between:

                     (a)  the old employer or an associated entity of the old employer ; and

                     (b)  the new employer or an associated entity of the new employer ;

the new employer , or the associated entity of the new employer , owns or has the beneficial use of some or all of the assets (whether tangible or intangible):

                     (c)  that the old employer , or the associated entity of the old employer , owned or had the beneficial use of; and

                     (d)  that relate to, or are used in connection with, the transferring work .

Old employer outsources work to new employer

             (4)  There is a connection between the old employer and the new employer if the transferring work is performed by one or more transferring employees , as employees of the new employer , because the old employer , or an associated entity of the old employer , has outsourced the transferring work to the new employer or an associated entity of the new employer .

New employer ceases to outsource work to old employer

             (5)  There is a connection between the old employer and the new employer if:

                     (a)  the transferring work had been performed by one or more transferring employees , as employees of the old employer , because the new employer , or an associated entity of the new employer , had outsourced the transferring work to the old employer or an associated entity of the old employer ; and

                     (b)  the transferring work is performed by those transferring employees , as employees of the new employer , because the new employer , or the associated entity of the new employer , has ceased to outsource the work to the old employer or the associated entity of the old employer .

New employer is associated entity of old employer

             (6)  There is a connection between the old employer and the new employer if the new employer is an associated entity of the old employer when the transferring employee becomes employed by the new employer .

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  • Other employment relations
  • Employee entitlements in transfer of business

Employee Entitlements in Transfer of Business

Published December 7, 2020 (last updated on November 30, 2023) | Adam Wyatt - Content Writer

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The sale of a business is a complicated process. Business owners (seller/old employer) have to perform valuations, align all their paperwork, and draft contracts, among other things. They have to think about their employees and whether they will go on to work with the new employer or be terminated altogether. This guide will focus on the transfer of business provisions under the Fair Work Act.

Old employers who are planning to sell their businesses have limited options when it comes to managing their employees. Employees can transfer to the new employer if the new employer chooses to offer them ongoing employment or the old employer must end their employment. But the law requires that employers fairly treat employees through the change by:

Providing notice

Finalising payments (inclusive of any notice and redundancy pay owing)

The  Fair Work Act  2009 requires old employers to provide employees with official notice in writing, irrespective of whether the employees’ transition to the new employer or cease working with the business.

Transfer of Business Provisions under the Fair Work Act

When does a transfer of business occur.

A transfer of business happens when all the following criteria are met, as specified in the Fair Work Act: 

When the employment contract between the transferring employee and old employer ends

When the new employer hires the transferring employee within three months of termination 

When the transferring employee essentially does the same work for the new employer as they did for the old employer

One or more of the following connections between the new employer and old employer must exist:

Old employer’s business assets are transferred or sold to the new employer

The new employer and old employer are associated entities

The old employer outsources its work to the new employer

The previously outsourced work is insourced

The transfer of employment happens in two cases; where the transfer is between associate entities or non-associated entities. The former involves related bodies corporate or where the new employer controls the old employer (and vice versa).

Transferrable Instrument 

When a transfer of business occurs, specific industrial instruments that covered employees of the old employer may continue to do so when the employees transition to the new employer. These instruments include: 

Enterprise or Individual flexibility Agreements  

A workplace determination

Guarantees of actual earnings

However, applicable modern awards do not transfer across.

Orders can be sought from the Fair Work Commission to prevent a transferrable instrument from transferring. 

These workplace instruments will cover the transferring employee even as they work under the new employer until it’s terminated or until a new job instrument starts, which can cover the transferring employees.

Transferring Employee from One Business to Another

Once all the above requirements are met, the new employer must consider the period of service that the employee in question has had with the old employer when figuring out most of their  entitlements with the new employer, including: 

Parental leave

Request for flexible working arrangements

Personal/carer’s leave

If the new employer is an associated entity or recognises the service, then the employee’s transfer to the new employer with all entitlements and continuous service recognised. There is no termination of employment.

The new employer must give notice in writing to the employee that it will not recognise service  prior  to the commencement of the employee’s employment with the new employer for this exception to apply.  Previous service will usually still count for the purposes of calculating long service leave depending on the relevant state legislation.

Certain exceptions exist when it comes to continuous service. In situations where the new employer isn’t an associated entity of the old employer, he or she may choose not to recognise a transferring employee’s previously accrued service for the purposes of redundancy pay,  annual leave under the National Employment Standards (NES), or unfair dismissal.

In this case, the old employer must pay the employee redundancy pay, notice, and accrued annual leave on termination.

The transferring employee may not be entitled to redundancy pay if they turn down the job offer from the new employer and:

The new employer acknowledges their service with the old employer 

The terms and conditions are similar to their previous employment with the old employer

The employee’s  acceptance would have resulted in a transfer of employment

Unfair Dismissal

Under the Fair Work Act, a transferring employee is protected from unfair dismissal where service is recognised and where they have served the “minimum employment period” with the old employment at the time of their dismissal, and when at least one of these apply:

The total of their yearly earnings is less than the high-income threshold

An enterprise contract applies to the employee regarding their employment 

A modern award covers the transferring employee

Transferring a business can be a stressful experience for employees.

Communication comes in handy during this phase of change. As the transfer is ending the employee’s employment, old employers must provide notice or payment in lieu of notice to all staff. Should the transfer of business happen before the notice period elapses, the old employer should still pay the remainder of the notice period to their employees even if they continue to work for the new employer. 

Frequently Asked Questions

Not only do certain employee entitlements transfer from the old employer to the new employer if service is recognised, but certain industrial instruments that covered the employees at the old employer, such as enterprise agreements, may transfer across and continue to apply to their employment with the new employer

When an entity buys or takes over a business or part of the business, and is an associated entity or chooses to employ employees from the old business, the Fair Work Act 2009 ( the Act ) provides for certain employee entitlements and industrial instruments to transfer with the employment.

For a Transfer of Business to take place the following conditions must be met:

  • the employment of an employee with the old employer is terminated and within three months of the termination the employee becomes employed by the new employer;
  • the employee performs substantially the same work for the new and old employers; and
  • there is a   connection   between the old and new employers.

There are three options, and all these options require expert assistance to fully understand. Please get in touch with Employsure to learn more about these options

  • option 1 – Default position
  • option 2 – Non-associated entities
  • option 3 – No notice is given

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What is a transfer of business under the Fair Work Act

transfer of business fair work act

For the purposes of the Fair Work Act, a transfer of business occurs when

(a) the employment of an employee of the old employer has terminated;

(b) within 3 months of the termination, the employee becomes employed by the new employer;

(c) the work the employee performs for the new employer is the same, or substantially the same, as the work the employee performed for the old employer; and

(d) there is a relevant ‘connection’ between the old employer and the new employer.

This is important because inter alia in circumstances which constitute a transfer of business in the statutory sense, applicable enterprise agreements which applied to  employees transferring to the new employer continue to be binding upon the new employer for those employees. They may also continue to apply to non-transferring employees of the new employer. In Community and Public Sector Union, NSW Branch v Northcott Support Living Limited [2021] 8 delivered 20 January 2021 the Federal court held that when determining (c) above the test does not involve a ‘technical’ comparison of the employee’s duties for the original and then the transferring employer rather the should focus should be upon whether the ‘fundamental nature’ of the employee’s work had changed from what it had been before for example work can still be regarded as the same or substantially the same despite

  • the manner in which employees perform their duties may have altered;
  • an employee’s new position may involve further duties or some functions of a position may no longer be required and so forth.

However if there are changes which are “material” or ‘fundamental’, the work will be regarded as no longer being the same or substantially the same which will be a question of fact and degree.

Her Honour Katzman J put it this way

  • The meaning of “the same or substantially the same work”
  • In order to answer the statutory question, it is first necessary to consider what is meant by the phrase “the same, or substantially the same work” for the purposes of s 311(1)(c) of the FW Act..
  • I was informed by the parties that the meaning of the phrase has not been the subject of judicial consideration.  I was also informed that it was not used in the predecessor legislation, the Workplace Relations Act 1996 (Cth) (WR Act). It was common ground that little was to be gained by considering the same or similar expressions in different contexts, since the interpretation of the expression depends very much on the context and purpose of s 311.
  • It is trite that, in order to discern the meaning of any word or phrase in a statute, one begins with the text but the text must be read in its context and that includes the legislative history and the statutory purpose or intention:  see, for example, CIC Insurance Limited v Bankstown Football Club Limited (1997) 187 CLR 384 at 408 (Brennan CJ, Dawson, Toohey and Gummow JJ). Purpose is particularly important since s 15AA of the Acts Interpretation Act 1901 (Cth) requires that the interpretation that best achieves the statutory purpose is to be preferred over any and all other possible interpretations.
  • As the CPSU submitted, by the inclusion of the words “or substantially the same” to qualify the work, the text makes it clear that an employee may be a “transferring employee” even though the work may have changed to some extent.
  • I referred above to s 309 which describes the object of Pt 2-8.
  • The CPSU submitted that the purpose of s 311 is to protect the terms and conditions of employment of the transferring employees. It argued that other provisions of Pt 2-8, specifically those in Div 3, are intended to provide for the employers’ interests in the efficient operation of their enterprises. They include s 319(1), which gives the Fair Work Commission power to make orders, including that a transferable instrument does not, or will not, cover the new employer and its transferring employee. In making such an order the Commission is required to take into account, amongst other things, whether the transferable instrument would have a negative impact on the productivity of the new employer’s workplace and whether the new employer would be significantly disadvantaged economically if it were covered by the transferable instrument covering the new employer: s 319(3). Similarly, s 320(2) gives the Commission power to vary a transferable instrument for certain purposes, including “to enable the transferable instrument to operate in a way that is better aligned to the working arrangements of the new employer’s enterprise”. The matters to be taken into account in making such an order are the same as those to be taken into account in considering whether an order under s 319(1) should be made: s 320(4).
  • It is true that, based on a plain reading of the text, some provisions of Pt 2-8 appear to be directed towards one object of s 309 more than another. But I do not accept that only one of the objects mentioned in s 309 is relevant to the interpretation of s 311. Section 309 applies to the whole of Pt 2-8.
  • It is clear from s 309 that the Parliament was concerned to strike a balance between potentially conflicting interests.  In like circumstances, Gleeson CJ remarked in Carr v The State of Western Australia (2007) 232 CLR 138 at [5] that the rule of interpretation in s 15AA may be of little assistance. His Honour went on to observe that “the problem of interpretation is that there is uncertainty as to how far the provision goes in seeking to achieve the underlying purpose or object”. So the question is not what the purpose is, but how far the legislation goes in pursuit of that purpose or object (at [7]). The court must rely on the text, construed according to such principles of interpretation as “provide rational assistance in the circumstances of the particular case” (at [6]).
  • In determining the meaning of the phrase — “the same, or substantially the same work” —the legislative history provides some limited assistance.
  • While the phrase may not have been used in the predecessor legislation, a virtually identical phrase appeared in Pt 22 of the WR Act — albeit in a different, though not entirely unrelated, context. Part 22 was inserted into the Act by the Workplace Relations Legislation Amendment (Independent Contractors) Act 2006 (Cth) and came into force on 1 March 2007. Part 22 introduced a suite of provisions to prohibit and penalise sham contracting and was self-evidently intended to protect terms and conditions of employment. Section 902, for example, prohibited an employer from dismissing, or threatening to dismiss, an employee for the sole or dominant purpose of engaging the employee as an independent contractor to perform “the same work, or substantially the same work” under a contract for services.  Section 903 prohibited a person who employed, or at any time had employed, an individual to perform particular work from knowingly making a false statement with the intention of persuading or influencing the individual to enter into a contract for services under which the individual would perform, as an independent contractor, “the same work, or substantially the same work” for the person. Sections 902 and 903 were re-enacted in the FW Act as ss 358 and 359. These provisions appear in Div 6 of Pt 3-1 of the Act.
  • It is true that the phrase used in s 311(1)(c) is not identical, but the difference is inconsequential. It is merely a product of the grammatical construction of the paragraph. I was not taken to any authority dealing with the construction of s 358 or 359 or its antecedents. But in Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd (2015) 228 FCR 346 at [95] the Full Court (North, Barker and Bromberg JJ) held that there could be “no doubt” that Div 6 of Pt 3-1 “seeks to address the same mischief as that addressed by Pt 22 of the WR Act”. The Full Court also held that “these provisions should be regarded as remedial and beneficial despite their penal nature”.
  • In accordance with “the primary object of statutory construction”, s 311(1)(c) must be construed in a way that is consistent with the language and purpose of all the provisions of the FW Act, including ss 358 and 359: see Project Blue Sky Inc. v Australian Broadcasting Authority (1998) 194 CLR 355 at [69]–[70] (McHugh, Gummow, Kirby and Hayne JJ).
  • It has rightly been said that “‘substantial’ is not a word with a fixed meaning in all contexts”:  AE Terry’s Motors Ltd v Rinder [1948] SASR 167 at 180 (Mayo J). The online edition of the Macquarie Dictionary (accessed 6 January 2020) offers 10 different meanings, none of which seems to hit the mark.  The closest would appear to be “of or relating to the essence of a thing; essential, material, or important”.  In Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees Union (1979) 42 FLR 331 at 348 Deane J observed that “[t]he word ‘substantial’ is not only susceptible of ambiguity: it is a word calculated to conceal a lack of precision”. As it was said of the adjective, so it may be said of the adverb.
  • Then there is the question of what is meant by the noun “work” as it appears in s 311(1)(c). The word is not defined in the Act. It follows that it is intended to have its ordinary meaning. But the meaning can vary. Some fifteen meanings are listed in the Macquarie Dictionary.  Relevantly, they include:
  • Exertion directed to produce or accomplish something; labour; toil.
  • That on which exertion or labour is expended; something to be made or done; a task or undertaking;
  • Productive or operative activity.
  • employment; a job, especially that by which one earns a living.
  • On this question some guidance is offered by the Explanatory Memorandum to the Fair Work Bill 2008 (Cth).  As Gageler J recently remarked, having regard to their provenance and the circumstances in which they were created, explanatory memoranda for Government bills introduced into the Parliament can ordinarily be taken by the courts as reliable guides to the policy intentions underlying Government-sponsored legislation:  Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union known as the Australian Manufacturing Workers Union (AMU) [2020] HCA 29; 94 ALJR 818; 381 ALR 601; 297 IR 338 at [71]. The Explanatory Memorandum to the Fair Work Bill indicates that Parliament intended that a broad approach is to be taken to the meaning of “work” in the paragraph and that a narrow, technical construction is to be eschewed.
  • The Explanatory Memorandum at [1217]–[1218] relevantly states:
  • Under paragraph 311(1)(c), the transferring employee must perform the same, or substantially the same, work for the new employer as she or he performed for the old employer.  It is intended that this provision not be construed in a technical manner.  It recognises that, in a transfer of business situation, there may well be some minor differences between the work performed for the respective employers.  However, the requirement is satisfied where, overall, the work is the same or substantially the same – even if the precise duties of the employees, or the manner in which they are performed, have changed.
  • Further, although paragraph 311(1)(c) is framed in terms of the work undertaken by an individual employee, in many instances a transfer of business occurs and a group of employees is engaged by the new employer.  In this circumstance, it may be possible to categorise the work more generally.  For example, if the old employer runs a supermarket and sells the supermarket to the new employer, the work might be characterised generally as retail work in a supermarket.  The fact that an employee may have stacked shelves for the old employer but now works on the checkout for the new employer would not stop the employee from being a transferring employee.

(Emphasis added.)

  • In closing argument, counsel for the respondents accepted that s 311(1)(c) should be construed in a non-technical manner.
  • I conclude that, in the balance between the objects in s 309, the primary purpose of s 311 is to protect the terms and conditions of employment under the relevant industrial instruments and prevent their avoidance in the event of a transfer of business to “an associated entity”. Having regard to that purpose, a narrow approach to the meaning of “work” is not called for.
  • “Work” in the context of s 311 refers to the nature or character of the employment, rather than the particular duties the employee was undertaking or will or may be called upon to undertake. It is abundantly clear from the Explanatory Memorandum that that was the legislative intention. This interpretation serves the legislative purpose. As a matter of principle, focusing on the substance of the work, rather than the particular duties that may or may not be required or performed at any particular time, would not unduly interfere with the interests of employers in running their enterprises efficiently.
  • It follows that I accept the CPSU’s submissions that the work performed by a transferring employee for the new employer may be the same, or substantially the same, even if some new duties are undertaken for the new employer, some duties formerly undertaken are no longer required, or the composition of the working day has changed, as long as the nature or character of the work remains the same or substantially the same.
  • It defies common sense to think that a different construction was intended.  After all, as the CPSU argued, duties can (and often do) change during the life of a single contract of employment without altering the fundamental nature of the work.  Northcott itself recognised as much in its position descriptions, noting that the list of duties was “indicative only” and “subject to change”.
  • A good example of such a case is Cresswell & Ors v Board of Inland Revenue [1984] 2 All ER 713 (Walton J). In that case a number of clerical assistants and tax officers employed by the Board of Inland Revenue objected to the introduction by the Board of the computerisation of the PAYE scheme which would have the effect that calculations formerly carried out by tax officers would be done by computer, all necessary documentation following an individual change of coding would be sent out automatically and, where there was a universal review of coding, all necessary alterations and notifications would be made or given automatically. The employees contended that the introduction of the computerised system would amount to such a change in the nature of their jobs that they were being asked to perform work under wholly different contracts without their consent. The employees’ contention was emphatically rejected by the court. At 721 his Honour said that “there can really be no doubt as to the fact that an employee is expected to adapt himself to new methods and techniques introduced in the course of his employment”, although, “in a proper case the employer must provide any necessary training or retraining”.
  • In Cresswell, Walton J referred to O’Neill v Merseyside Plumbing Co Ltd [1973] ICR 96. In that case an employee who had been working for the best part of 25 years as a gas fitter and was directed to work at a hospital site as a general plumber argued unsuccessfully that the purported transfer to work of a different kind than that to which he was accustomed made his job redundant.

Consideration

  • Applying this analysis to the facts of the instant case, the work the transferring employees perform as service coordinators is best characterised as a frontline management in a group home in which supported care and services are provided to the disabled.  Although their duties have in some respects changed, overall the work they are performing and are required to perform is substantially the same as the work they were performing as team leaders for NSL.
  • Team leaders were and service coordinators are the senior employees working in group homes.  Team leaders were and service coordinators are the sole supervisors of support workers with immediate responsibility for the delivery of care to the employer’s clients or customers. Although the team leaders have additional responsibilities as service coordinators, most of their administrative and management responsibilities are the same as those they had previously.  They remain “responsible for managing the day to day operation of the unit(s) and providing direct support and supervision for Disability Support Workers”.  The fact that when they commenced employment with Northcott they were relieved from the constraints of the roster and most of the direct care was, and continues to be, performed only by support workers did not change the essential character of their work.  Nor did any of the other matters upon which Northcott relies.  As the position description for service coordinator indicates, the typical duties of the position include “provid[ing] direct support to customers as needed”.
  • Ms Carpenter deposed that the only time a service coordinator should perform direct care is if all other options for completing the work have been exhausted.  She went on to say:

A gap in the roster could arise, for example, if a support worker calls in sick or a customer does not attend day programs.  Before stepping in to perform direct care work, the Service Coordinator is expected to contact casuals, the rostering team, agencies and other managers to attempt to find someone to cover the shift, or ask a support worker to stay back.  If the Service Coordinator exhausts avenues and cannot find anyone available, a Service Coordinator may then need to assist to provide support.  That is because we operate in an environment where if all else fails, we cannot leave customers without support.

  • While this was no doubt the ideal, the evidence established that this regimen was not always followed.  Nor, having regard to the exigencies, could it have been.  For example, a “customer” having an epileptic fit, a psychotic episode, or just needing assistance to go to the toilet could not be left to his or her own devices while the service coordinator sits in the office trying to find a replacement for the support worker.
  • Even if the matters upon which Northcott relies are considered together, it makes no difference.  Team leaders could have been called upon to undertake the additional tasks required of them as service coordinators.  The additional tasks were all well within the team leader position description.  Equally, they could have been relieved of roster duties.  There was nothing in the team leader position description which would have prevented that.  Indeed, the position description made no mention of team leaders working according to a roster.
  • The fact that the transferring employees no longer undertake shift work is immaterial.  The work is substantially the same regardless of when it is performed.
  • Ms Carpenter deposed that under the Community Living Award the remuneration for team leaders was set at an amount that included remuneration for providing direct care to customers on three afternoon shifts, two evening shifts and one weekend shift during each 28-day roster period. That is true. But this circumstance has no bearing on the application of s 311(1)(c).
  • Contrary to the respondents’ submission, there has been no significant change to the organisational context in which the transferring employees carry out their work.  At all relevant times at least, Northcott has been a disability services provider providing accommodation, respite and in-home services to people with disabilities.  The changes to funding arrangements brought about by the introduction of the NDIS did not alter that.  In any event, those funding arrangements were in place when the employees were working as team leaders for NSL.
  • As team leaders the transferring employees were frontline leaders or managers, despite the fact that they were also required to perform direct care for a certain number of hours in accordance with a monthly roster.  Like the service coordinators, they were the only supervisory employees working in the homes.  In both positions they acted as managers in those homes.  In both positions they conducted team meetings.  In both positions they had supervisory responsibilities with respect to casual staff.  In both positions they were involved in the preparation of rosters.  In both positions they liaised with internal and external personnel.  In both positions they inducted new staff.  In both positions they were involved in the recruitment process for support workers; only the extent of that involvement has increased.  When they were undertaking direct care as team leaders on the roster, they often worked alongside support workers.  In doing so, as Ms Carpenter admitted in cross-examination, they were expected to model best practice.  Both as team leaders and service coordinators, they were and are expected to lead by example.  The reallocation to service coordinators of some of the tasks previously carried out by CARS did not change the essential character or nature of the work of the former team leaders.
  • The respondents relied on Ms Carpenter’s description of the team leader role of “a hybrid” of direct support work when rostered and “work associated with the administrative aspects of the role” when not.  But this description was misleading.  It overlooked both the central importance of the managerial and leadership features of the team leader’s work and the direct care required of service coordinators.
  • It will be recalled that “the primary purpose” of the team leader role, according to the position description, was to “[lead] a team of disability support workers and manage the operations of supported accommodation and respite unit or in home support services to ensure delivery of quality person centred services”.  The primary purpose of the service coordinator role is no different.
  • It will also be recalled that, in the “key objective of the position” appearing in the position description of service coordinator, practice leadership was defined as including conducting team meetings; one to one supervision; allocating and organising staff; modelling and coaching; and quality of life outcomes.  The equivalent duty in the list of duties was listed at point 7:

Provide effective supervision and mentoring of staff.

  • Similarly, the first of the “key accountabilities” in the position description for the team leader position which was in force immediately before the transfer was:

Provide leadership, support and supervision to a team of disability support workers, models best practice and facilitates an open and fair team environment.

  • It is tolerably clear from the evidence that “modelling” means role modelling or leading by example.  Training materials issued by Northcott included the following description of “a day in the life” of a service coordinator:

Coordinator will already be aware of which part of the day their support is most required.

Greet team and customers on entry role model minimal fuss with putting items away (not in common areas) sign in and step straight into assistance.

– Cooking – Personal care – Documentation – Customer interaction

– Cleaning – Appointments -Transport – Equipment Maintenance

Try to hold back opinions, rather seek to understand how and why things are done, work alongside team to support customers with daily living and working on strategies. Offer support where required.

In quiet and down times support for teams can be completed such as rostering, Emails, Monitoring shift reports, Plans are up to date, Working within budget – Petty cash, Liaising with stake holders. Staff supervision, team meetings and performance managing.

  • This was followed by a description of what was meant by “leading by example”:

Ÿ             Be involved as much as possible whatever time is available during the day be it 10 minutes or 3 hours supporting staff and customers.

Ÿ             Utilise time to coach / mentor staff in development areas especially staff new to Northcott for at least the first month (see induction)

Ÿ             Build a rapport and relationship with the customers to understand the needs that would usually be directed down the formal channels by engaging on a day to day basis.

Ÿ             Increase in building positive interactions and desired behaviours demonstrating to staff Northcott values and excellent customer service.

  • These descriptions accord with the evidence of the CPSU’s witnesses and are at odds with some of the evidence given by Ms Carpenter.  They are markedly similar to the work they performed as team leaders.
  • It will be recalled that the team leaders undertook little additional training before they commenced employment as service coordinators.  Indeed, it appears from Ms Carpenter’s evidence that Northcott considered that they could walk straight into the job and receive training when it was convenient.  Furthermore, Ms Carpenter conceded in cross-examination that the training program Northcott planned to provide the transferring employees was part of its ongoing leadership training for all its leaders.  That includes those who were employed by NSL as CARs and whose work admittedly did not change.  And Ms Carpenter testified that it had been provided in the past to team leaders.
  • Contrary to the CPSU’s submission, however, the fact that the team leaders were considered to possess the necessary skills, experience and qualifications for the service coordinator positions and were not required to undergo training before they were offered the positions with Northcott does not support the conclusion that the work involved was substantially the same, any more than the work of a judge can be said to be substantially the same as the work of a practising lawyer.  It is entirely neutral.  But the fact that some training was planned or contemplated does not derogate from the conclusion that the work the transferring employees perform as service coordinators was fundamentally or substantially the same work they had been performing as team leaders.  These days “upskilling”, further training or continuing education is commonly provided to employees without affecting the nature of their work or descriptions of their jobs.
  • For the purposes of s 311(1)(c) of the FW Act, the service coordinator work is substantially the same as the team leader work. Consequently, I find that there has been a transfer of business under s 311 of the Act and that the copied State awards continue to cover Northcott and those employees of NSL who were team leaders and who are now employed by Northcott as service coordinators.”

Community and Public Sector Union, NSW Branch v Northcott Supported Living Limited [2021] FCA 8 delivered 20 January 2021 per Katzman J

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Transfer of business and transfer of employment under the FW Act | Practical Law

transfer of business fair work act

Transfer of business and transfer of employment under the FW Act

Practical law anz practice note w-013-0494  (approx. 22 pages).

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transfer of business fair work act

Transfer of business 

There are many employment issues to deal with when a business is transferred from one employer to another. Read what you need to do. 

24 September 2021

The transfer of business provisions under the Fair Work Act 2009 apply where a business is transferred from one national system employer to another. This includes some insourcing and outsourcing arrangements and covers some changes of employer within corporate groups.

It means the transfer provisions under the Fair Work Act are based on the transferring of activity and an employee or employee going with that activity. There is no transfer of business for the purposes of the Fair Work Act unless at least one employee moves to the new employer. 

The intention of transfer of business provisions is to ensure the service of all employees who follow the business or activity are deemed to be unbroken by the transfer, and the period of service which the employee has had with the previous owner of the business is to be deemed service with the new owner. 

Provision is made in the Fair Work Act to protect the accrued entitlements of employees during a transfer of business.  

 When a transfer occurs 

 Section 311 of the Fair Work Act provides that there is a transfer of business if each of the conditions in ss311(1)(a)-(d) are satisfied, which are: 

  • one or more employees is terminated from the first employer 
  • the employee(s) become(s) employed by the second business within 3 months doing substantially similar work 
  • the work that the employee performs for the new employer is substantially the same as that performed for the old employer, and 
  • there is a connection between the two employers. 

Associated entities 

 Section 50AAA of the Corporations Act 2001 (Cth) defines an “associated entity” of another entity (the principal) in the following circumstances: 

  • the associate and principal are related bodies corporate 
  • the principal controls the associate 
  • the associate controls the principal and the operations, resources or affairs of the principal are material to the associate 
  • the associate has a qualifying investment in the principal, has significant influence over the principal and the interest is material to the associate 
  • the principal has a qualifying investment in the associate, has significant influence over the associate and the interest is material to the principal 
  • a third entity controls both the principal and the associate and the operations, resources or affairs of the principal and the associate are both material to the third entity. 

 The word “control” is defined in s50AAA of the Corporations Act  to mean when one entity controls another when the first entity can make decisions that determine the financial and operating policies of the second entity. 

Transfer between non-associated entities 

 Service with one employer (first or old employer) will count as service with another employer (second or new employer) that is not an associated entity of the first employer if the employee is a transferring employee in relation to a transfer of business from the first to the second employer. 

The following would be considered a connection between the two employers in a transfer of business situation: 

  • there is a transfer of some assets from one employer to another 
  • there is the outsourcing of work from one employer to another, which can occur regardless of whether any assets change hands 
  • there is an “insourcing” of work from one employer to another 
  • there is a transfer of employment between associated entities as defined in the  Corporations Act 2001 [Cth] .  

Section 311(3)(b) of the Fair Work Act states that there is a connection between the old employer and the new employer if the new employer or associated entity owns or has the beneficial use of some or all of the assets (whether tangible or intangible) that the old employer or associated entity owned or had the beneficial use of and that relate to, or are used in connection with, the transferring work. 

Transfer of assets: arrangement 

 Section 311(3) of the Fair Work Act provides one of the conditions of a transfer of business that must be satisfied is that there is a connection between the old and new employer as described in any of ss311(3-(6) of the Act. That is, there must be an arrangement between the new and old employer for “the beneficial use of assets” of the old employer “that relate to, or are used in connection with the transferring work”. The word “arrangement” is not defined in the Act, but the Explanatory Memorandum to the Fair Work Bill 2009 states that “arrangement” is intended to be interpreted “broadly”. 

 The relevant authorities on determining the meaning of “arrangement” propose that, while not legally enforceable, it requires: 

  • that there be communication between the parties to the arrangement, and 
  • that the parties must reach some understanding, and 
  • that there is some expectation that each of the parties will behave in a particular way. 

An arrangement is not an expectation that a party will behave in a particular way and it cannot be contrived. It requires some substance. 

Non-associated entities – transfer of assets 

In a case before the Fair Work Commission (FWC), an employee worked for the old employer in a café. The business was purchased by the new employer. The employee worked three shifts for the new employer doing the same work before he was dismissed. 

The FWC held that there was a transfer of employment because there was a transfer of business between the old employer and the new employer. There was a connection between the old employer and the new employer as the transfer of business involved a transfer of assets. Further, as the new employer had not informed the employee in writing that his previous service would not be recognised, the employee’s service with the old employer counted as service with the new employer.   Hill v Sahir T/A Cafe Moderno at Fountain Gate [2013] FWCA 668 (30 January 2013) (austlii.edu.au)

New employer ceased to outsource work 

In a case before (then) Fair Work Australia, the employee worked for the old employer, which provided labour to the new employer. After two years, the new employer ceased to outsource work to the old employer. The old employer terminated the employee’s employment, and she was employed by the new employer but dismissed after about three weeks. 

The employer was found to be a transferring employee in relation to a transfer of business. There was a connection between the old employer and the new employer because the new employer had ceased outsourcing work to the old employer. The employee was not informed in writing by the new employer that previous service with the old employer would not count as service with the new employer, and therefore it did not count. See  Thorne v Jura Australia Espresso Pty Ltd [2012] FWA 4954 . 

No relevant connection between employers 

 In a case before (then) Fair Work Australia, the employee worked as a security guard for the old employer, which provided site security under contract. A tender process resulted in the new employer being awarded the contract. The employee was offered employment with the new employer but was dismissed the following month. It was held that there was no connection between the employers, and therefore no transfer of business. As such, service with the old employer did not count as service with the new employer.  Szybkowski v Monjon Australia Pty Ltd t/as Monjon Australia Pty Ltd [2010] FWA 7321 (17 September 2010) (austlii.edu.au)

In another case before the Fair Work Commission, the employee had been employed by the old employer to work at a hotel. The old employer operated the hotel under a lease with the owners. The old employer abandoned the lease, and the owners leased it to the new employer. The new employer employed the employee to perform the same duties but later dismissed her. On appeal, it was found there was no connection between the old employer and the new employer because there was no evidence of a transfer of assets in accordance with any arrangement between the employers.   Appeal by John Lucas Hotel Management Services [2013] FWCFB 1198 (22 February 2013) (austlii.edu.au)

Intangible assets 

 Intangible assets are defined as identifiable non-monetary assets that cannot be seen, touched or physically measured, which are created through time and/or effort and that are identifiable as separate assets. There are two primary forms of intangibles — legal intangibles (eg trade secrets, customer lists, copyrights, patents, and trademarks), and competitive intangibles such as knowledge activities (eg know-how, collaboration activities, leverage activities, and structural activities). Legal intangibles are known under the generic term intellectual property and generate legal property rights defensible in a court of law. 

No beneficial use of assets – no transfer of business 

In a case before Fair Work Australia involving a jurisdictional point regarding the employee’s period of employment, it was determined that leaving some electrical appliances and a procedures manual did not satisfy the requirements that the arrangement entered into by the employers was not a beneficial use of assets, so no transfer of business occurred.   Zabrdac v Transclean Facilities Pty Ltd [2011] FWA 4492 (25 August 2011) (austlii.edu.au)    

Work performed 

  Under 311(1)(c) of the Fair Work Act , the transferring employee must perform the same, or substantially the same, work for the new employer as he/she performed for the old employer. It is intended that this provision not be construed in a technical manner. It recognises that, in a transfer of business situation, there may well be some minor differences between the work performed for the respective employers. However, the requirement is satisfied where, overall, the work is the same or substantially the same — even if the precise duties of the employees, or the manner in which they are performed, have changed. 

This section of the Act relates to the similarity in the actual work performed by the transferring employee. While the work of the companies, the employee’s title and precise duties may have changed, if the overall work performed for both employers is substantially the same, a transfer of business occurs.   Farrugia v Building Technology Integrators Pty Ltd [2011] FWA 1285 (14 March 2011) (austlii.edu.au)    

Instruments that may transfer

Section 312 of the Fair Work Act defines the meaning of a “transferable instrument” as either:  

  • an enterprise agreement approved by the Fair Work Commission 
  • a workplace determination 
  • a named employer award. 

The term “named employer award” means: 

  • a modern award (including a modern enterprise award) that is expressed to cover one or more named employers 
  • a modern enterprise award that is expressed to cover one or more specified classes of employers (other than a modern enterprise award that is expressed to relate to one or more enterprises [similar businesses under the same franchise]). 

 Each of the following is a transferable instrument: 

  • a modern award 
  • a notional agreement preserving a state award 
  • a named employer award (a modern award that commences from 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 to high-income employees, with the second employer required to comply with the remaining period of the guarantee of annual earnings transfers. 

Enterprise agreement – new employer 

 Under s313 of the Fair Work Act , an enterprise agreement that already covers the new employer would NOT cover a transferring employee who is covered by a “transferable instrument”, eg an enterprise agreement with the old employer. This is referred to in the Act as the default position. 

 In order for the company’s enterprise agreement to apply to the transferring employees, the employer would need to make an application to the Fair Work Commission as set out in s318, seeking an order that the company’s enterprise agreement should apply to transferring employees. 

In deciding whether to make the order, the Fair Work Commission must take into account the following: 

  • the views of the new employer and the employees who would be affected by the order 
  • whether any employees would be disadvantaged by the order in relation to their terms and conditions of employment 
  • if the order relates to an enterprise agreement – the nominal expiry date 
  • whether the transferable instrument would have a negative impact on the productivity of the new employer’s workplace 
  • whether the new employer would incur significant economic disadvantage as a result of the transferable instrument covering the new employer 
  • the degree of business synergy between the transferable instrument and any workplace instrument that already covers the new employer (eg the enterprise agreement) 
  • the public interest. 

It may be difficult to convince the FWC that the company’s enterprise agreement applies to the transferring employees if there is a significant reduction in their wages.   

 Industrial instruments which do not transfer 

 A modern award covering the transferring employee at the first employer does not transfer to the second employer. In many instances the same modern award will cover the same work at the second employer, but not in all cases.

Sometimes, the second employer will be covered by a different modern award or an enterprise award.  

Previous service and entitlements 

Section 22(5) of the Fair Work Act provides that if there is a transfer of business, any period of service of the employee with the first employer counts as service with the second employer; and the period between the termination of the employment with the first employer and the start of employment with the second employer does not break the employee’s continuous service with the second employer, but does not count towards the length of the employee’s continuous service with the second employer. 

 The prior service with the first employer is counted for: 

  • the amount of annual leave the transferring employee has with the second employer (less the service for any period of annual leave taken with the first employer or paid out by the first employer) 
  • the amount of personal leave (sick leave and carer’s leave) the transferring employee has with the second employer (less the service for any sick leave or carer’s leave taken with the first employer or paid out by the first employer) 
  • the amount of notice of termination the transferring employee is entitled to from the second employer (less the service for any period of notice given by the first employer or paid out in lieu by the first employer) 
  • the amount of service that the employer has with the second employer for determining eligibility for unpaid parental leave, or an employee’s right to request flexible working arrangements under the National Employment Standards 
  • the amount of service that the transferring employee has with the second employer for determining when the employee’s minimum employment period ends (for access to unfair dismissal claim rights) 
  • the amount of service the transferring employee has with the second employer for calculating redundancy pay if the employee is made redundant by the second employer (less any service for which redundancy pay was paid by the first employer). 

The recognition of service rules also applies to a “transfer of employment” scenario, where an employee takes up employment with an associated entity within three months. In a transfer of employment, it does not matter whether the employee performs the same or substantially the same work for the new employer. 

Exceptions  

Recognition of service with the first employer does not apply with respect to annual leave or redundancy pay under the National Employment Standards where the transfer is between non-associated entities if the second employer decides not to recognise the employee’s service with the first employer. 

Unless the first and second employers are associated entities, the second employer is not obliged to recognise prior service with the first employer for calculating the employee’s minimum employment period provided the second employer advises the transferring employee in writing that prior service will not be recognised before he or she commences employment. 

If the employee has already had the benefit of the entitlement the amount which was calculated on the period of service with the first employer is not counted when calculating service with the second employer. 

A transferring employee who is taking unpaid parental leave under the National Employment Standards at the time his or her employment transfers continues as if there has been no change of employment. He or she retains the right to extend parental leave, etc – as if there had been no change in employment. 

No obligation to employ 

Where there is a transfer of business under the Fair Work Act the second employer is not compelled to employ someone who would be a transferring employee if he or she was employed by the second employer. Refusing to employ someone in these circumstances does not breach the general protections in the Act. 

Fair Work Information Statement 

Any new employee must receive a Fair Work Information Statement from the employer. It must contain an explanation of the effect on an employee’s entitlements when he/she is subject to a transfer of business. 

Employment records 

The Fair Work Regulations 2009 contains provisions that specify the obligations of employers regarding the records of transferring employees. The old employer is required to transfer the employment record for each transferring employee at the time the connection between the two employers occurs, ie when the transfer of assets occurs, when the work is outsourced or insourced or, for associated entities, when the employee is transferred. If the transferring employee becomes an employee of the new employer after the transfer, the new employer must ask the old employer to provide them with the employee’s records and the old employer must give those records. These records must be kept by the new employer for seven years.

When one employer is not a national system employer 

The National Employment Standards applying to notice of termination and unpaid parental leave, and the additional consultation requirements applying to terminations of 15 or more employees, apply to State system employers as well as national system employers. 

However, there is no “transfer of employment” under the Fair Work Act when either the first or second employer is a State system employer. Industrial instruments do not transfer from the first to the second employer and prior service, except as it affects notice or parental leave, does not carry across by legislation. (The second employer may choose to recognise prior service). 

Where both employers are State system employers there may be rules in the State legislation covering the transmission of business or transfer of employment which preserve prior service or transfer industrial instruments. 

Referral of industrial relations powers 

Where an unincorporated business was bought by an incorporated business after 1 January 2010 (date of referral of industrial relations powers by State governments – except Western Australia) the previous state award will transfer with the employees.  

From 1 January 2011, the relevant modern award applied to the relevant employees. 

Amending the transfer – Fair Work Commission orders 

The second employer, or a transferring employee, may apply to the FWC for an order that a transferring award or agreement will not cover transferring employees or that an enterprise award or agreement which covers the second employer will cover the transferring employees. 

Under  s317 and 318 of the Fair Work Act, in the case of a transfer or likely transfer, the FWC may order: 

  • the transferable instrument does not cover the transferring employees or second business 
  • another enterprise agreement or named employer award which covers the second business covers the transferring employee(s). 

Applications to the FWC may be made by: 

  • the second business or likely second employer 
  • a transferring employee or someone likely to be a transferring employee of the second business 
  • a union covered by the enterprise agreement or named employer award. 

The FWC can also order that a transferable instrument does not apply to non-transferring employees undertaking transferred work, or that it does. 

In determining an application, the FWC will take account of: 

  • views of the new employer or a person likely to be the new employer 
  • employees likely to be affected 
  • the business interests of the second business 
  • the nominal expiry date of the relevant enterprise agreement 
  • the degree of business synergy between the transferable instrument and any workplace instrument that already covers the new employer 

It may also alter or clarify a transferable instrument in its operation at the second employer. 

Long service leave  

Although long service leave is referred to under the National Employment Standards, the source of entitlement for most employees is the relevant State or Territory long service leave statute, which would usually specify the requirements and obligations on a new employer when transmission of business occurs. 

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Home » Employers » Transfer of Business

Peters Bosel Lawyers is experienced in ensuring sellers of businesses avoid expensive redundancy payouts and retrospective claims for employment entitlements.

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Employment Law Solutions for Employers

Why you need to know about transfer of business obligations.

When a business changes hands, often the focus of the buyer and seller is firmly on the sale price and physical assets which are exchanged.  Other vital “assets” of the business, including the employees, are often overlooked.

Both the buyer and seller of a business need to carefully consider the implications of the buyer offering employment to existing employees of the seller, which can include automatic assumption of accrued entitlements of employees on transfer of the business. In addition, quite apart from consideration of whether employees will transfer with the sale of the business, the Fair Work Act 2009 , in some circumstances, also imposes continuity of certain terms of employment should such a transfer occur. It is therefore integral that both buyers and sellers understand what constitutes a “transfer of business” for the purposes of the Fair Work Act 2009  and the implications in the event that such a transfer has occurred.

What is a transfer of business for the purposes of the Fair Work Act 2009?

The Fair Work Act 2009  sets out the circumstances in which there will be considered to be a “transfer of business”.

The following requirements must be established before there is a transfer of business:

  • An employee’s employment with the old employer is terminated;
  • The employee is employed by the new employee within three (3) months of termination of employment;
  • The employee’s duties performed in the employment with the new employee is the same or substantially the same as the work the employee performed for the old employer;
  • The new employer owns or has use of some or all of the old employer’s assets that relate to the work performed by the employee;
  • The work from the old employer has been outsourced to the new employer;
  • Work previously outsourced is insourced; or
  • The old employer and new employer are associated entities within the meaning of section 50AAA of the Corporations Act 2001 .

Once these requirements have been established, there has been a transfer of business for the purposes of the Fair Work Act 2009 .

Terms of employment on “transfer of business”

When a new employer employs employees who are transferring from the selling entity, the terms of employment of the transferring employee must be clearly documented.

In this regard, the Fair Work Act 2009 provides that certain workplace instruments which covered the transferring employee when employed by the old employer, will continue to cover transferring employees in their new employment with the new employer. The Fair Work Act 2009  provides that the following “workplace instruments” will continue to cover the transferring employees on transfer of business:

  • An enterprise agreement approved by the Fair Work Commission, a collective agreement, a preserved individual or collective state agreement, an Australia Workplace agreement, an Individual Transitional Employment Agreement, a certified agreement made before 27 March 2006 and an old industrial relations agreement;
  • A workplace determination;
  • 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 employer);
  • Preserved redundancy provisions (in certain circumstances if the transfer occurred before 31 December 2009);
  • Individual flexibility arrangements;
  • Guarantee of annual earnings.

Each of the above workplace instruments (as applicable) will continue to apply to any transferring employee in a “transfer of business” until such time as the relevant workplace instrument is cancelled or until a new workplace instrument commences which can cover the transferring employee. The practical effect of these transfer of business provisions is that, in circumstances where the new employer already had employees prior to the transfer of business or engages new employees after the transfer of business, the new employer may have employees covered by different industrial instruments, and thereby working subject to different terms and conditions of employment.

Entitlements of employees on “transfer of business”

As a general rule, an employee transferring to a new employer as a result of a transfer of business, will have their period of employment with the old employer counted as service with the new employer.

This “continuity of service” will impact on certain National Employment Standards entitlements such as annual leave or redundancy pay, as well as the time at which an employee is eligible for parental leave or has the right to request flexible work arrangements.  However, in the event that the old and new employers are not associated entities , there is the ability for the old employer to pay out accrued annual leave and for the new employer to elect not to recognise a transferring employee’s period of service for the purposes of redundancy, long service leave and calculating service for the purposes of unfair dismissal.  This position should be clearly communicated to the transferring employee prior to the commencement of employment with the new employer. If that is the case, the old employer would have an obligation to pay the transferring employee their accrued entitlements to annual leave and long service leave (if any) prior to transfer of the business being effected.

In addition, in the event that a transferring employee has received payment for relevant accrued entitlements from an old employer at the time of transfer of business, then any service with the old employer is not counted in their employment with the new employer for the purposes of calculating those entitlements paid.

While a transfer of physical assets during the sale of a business may be simple, ensuring that employee entitlements are properly determined and resolved at the time of a transfer of business is often overlooked. When you are focussed on the logistics of the sale of a business, understanding and complying with the legislation around transfer of business can be time consuming and distracting, whether you are selling or buying. Both parties have the potential for exposure to unintended obligations to employees which can be addressed at the time of transfer of business.

Peters Bosel Lawyers can assist all parties to the sale of a business – and/or their legal advisors – to ensure the smooth transition of employment arrangements and the proper protection of a party’s position.

Peters Bosel Lawyers is experienced in ensuring sellers of businesses avoid expensive redundancy payouts and retrospective claims for employment entitlements. We have also assisted purchasers to benefit from effective indemnities and understand the full extent of post-acquisition employment obligations, which may not have been previously budgeted for.

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Apply for an order on transfer of business (Form F40)

With a transfer of business, any industrial instrument that previously covered an employee of the only employer will transfer to cover an employee of the new employer.

You may apply to the Commission using Form F40 for orders to vary the effect of the industrial instrument that transfers to the new employer (transferable instrument).

On this page:

Who can use this form

Before you start, what happens next, rules and regulations for this form.

Use this form to apply for an order to vary the effect of a transferable instrument when there is a transfer of business.

Have this information ready before you begin. You will need to tell us:

  • your details
  • your organisation's details (if you are applying on behalf of an organisation)
  • your representative's details, such as a lawyer or paid agent (if you are using one)
  • the name of the transferable instrument which applies to this application
  • the industry of the employer
  • the nominal expiry date of the transferable instrument
  • the details of the order sought.

We store your information in line with this form's Privacy notice (pdf) .

Fill out the application. Attach the supporting documents we ask for.

Email your application to [email protected] . You can also send or deliver your document to the Commission office near you.

You must include a copy of the transferable instrument with Form F40.

You must send ( serve ) a copy of your application and supporting documents on the other parties to the industrial instrument, any union that represents the transferring employee(s). You must do this as soon as possible.

After we receive your application, we will contact you to explain the next steps in the process.

Fair Work Act 2009 : Section 318 , Section 319

Fair Work Commission Rules 2013: Rule 34(1)

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  • Practical Law

Transfer of business

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Australia: Selling a business and the transfer of employee entitlements

View Michael  Bishop Biography on their website

The sale of a business involves the transfer of particular assets of the business from the Vendor to the Purchaser. This may include, amongst others, goodwill, plant and equipment, stock, intellectual property, licences, registrations, contracts and leases. In addition to this, there may also be employees working in the business who are offered employment by the Purchaser, and will continue to work in the business following its sale and purchase. Accordingly, it is important to take note of the obligations imposed on employers under the Fair Work Act 2009 (Cth) 1 ("FW Act") in relation to the transfer of employees as a result of a transfer of a business.

Transfer of business under the Fair Work Act

The transfer of business provisions under the FW Act refer to the transfer of a business from one employer to another and impose obligations on both the new employer and the old employer.

Pursuant to section 311(1) of the FW Act, there is a transfer of business between the old employer and the new employer if the following requirements are satisfied:

  • 'the employee's employment with the old employer has been terminated;
  • within 3 months after the termination, the employee is employed by the new employer;
  • the employee continues to perform the same or substantially the same work; and
  • there is a connection between the old employer and the new employer'. 2

A connection between the employers will exist, for the purposes of section 311(1), if:

  • there has been a transfer of assets from the old employer to the new employer;
  • the old employer outsources work to the new employer;
  • the new employer ceases to outsource work to old employer; or
  • the new employer is an associated entity. 3

Transfer of entitlements

Under the FW Act, in certain circumstances where a transfer of business occurs, an employee's service with the old employer is required to be recognised by the new employer.

Section 22(5) provides that the new employer will have to recognise an employee's prior service with the old employer if there is a transfer of employment. 4

A transfer of employment will arise in two situations, namely where:

  • the transfer is between associated entities; or
  • the transfer is between non-associated entities. 5

An associated entity is defined in section 50AAA of the Corporations Act 2001 (Cth) and includes "related bodies corporate" or instances "where one entity controls another (the associate)". 6

The employee's prior service will automatically count as service with the new employer if one of the two situations in section 22(7) exist and the period between termination of employment with the old employer and commencement with the new employer is not more than 3 months. 7

Exceptions to this rule arise however in respect of annual leave and redundancy pay.

If the transfer of employment is between non-associated entities and the new employer decides not to recognise the employee's service with the old employer, the old employer will be liable to pay out the employee's untaken accumulated annual leave. 8

Similarly, where the employers are non-associated entities, the same exception will apply in relation to redundancy pay if the new employee elects not to recognise the employee's service with the older employer. 9 This will result in an obligation on the old employer to pay redundancy to the employee upon termination.

We highlight however that the employee will not be entitled to redundancy pay if they reject the new employer's job offer and:

  • the new employer recognises their service with the old employer; and
  • the terms and conditions are similar to their position with the old employer; and
  • if the employee had accepted the job, there would have been a transfer of employment. 10

In relation to long service leave, the Long Service Leave Act 1992(Vic) provides that the transfer of employment does not break the continuous employment of the employee if:

  • "the ownership of a business employing someone changes but the employment of the employee continues"; 11 and/or
  • "an employee performs duties in connection with any assets used in the carrying on of a business of his or her employer and those assets are transferred to another employer who continues the employment of the employee." 12

A new employer will not however have to recognise an employee's service with the old employer when calculating an entitlement to long service leave if:

  • the employee is not entitled to long service leave under a registered agreement at 31 December 2009; or
  • an agreement was made on or after 1 January 2010 that replaces it; and
  • the new agreement says that service under an older agreement does not count towards long service. 13

This is not however a common scenario.

Generally the Vendor and Purchaser will negotiate any adjustments to be made to the Purchase Price, in consideration of the value of the employee entitlements that are to be transferred to the Purchaser as the new employer.

The transferring employee entitlements in relation to annual leave, personal leave and long service leave that have been accrued and not yet taken by the employee may be apportioned and the Purchase Price adjusted against the Vendor, subject to negotiation between the parties.

Transfer of instruments

Where a transfer of business is established under the FW Act, a named employer award (including a modern award or modern enterprise agreement), enterprise agreement or a workplace determination applicable to the transferring employee may also become binding on the new employer ("transferrable instrument"). 14

The transferrable instrument will only transfer to a new employer if it covered the old employer and the transferring employee prior to the employment with the old employer terminating. 15

The transferring instrument that relates to the transferring work, will:

  • 'cover the new employer and the transferring employee from the time the employee becomes employed by the new employer; and
  • while the transferring instrument covers the new employer and the transferring employee, no other enterprise agreement or named employer award will cover the transferring employee in relation to that work'. 16

Unfair dismissal

Under the FW Act, an employee is protected from unfair dismissal where they have completed the 'minimum employment period' with their employer at the time of their dismissal and one or more of the following applies:

  • a modern award covers that employee;
  • an enterprise agreement applies to the employee in relation to their employment; or
  • the sum of the employee's annual rate of earnings is less than the high income threshold. 17

Pursuant to section 383, the 'minimum employment period' is:

  • 1 year service where the employer is a small business who employs fewer than 15 employees at any given time; 18 or
  • 6 months service for larger employers 19 .

Where there has been a transfer of business between associated or non-associated entities, a transferring employee's period of employment is to be recognised by the new employer for the purposes of unfair dismissal laws. 20

However, in some cases, the new employer will not have to recognise an employee's service with the old employer. This will occur when the:

  • 'employee is a transferring employee;
  • the businesses are not associated entities ; and
  • the new employer informs the employee in writing before the new employment commences that the service with the old employer will not be recognised'. 21

As numerous legal issues arise in relation to a transfer of business, it is therefore important that a thorough due diligence is conducted by any potential buyer prior to purchase and that due consideration be given to the process applicable to the transfer of employees and their entitlements.

1 Section numbers in the body of the article refer to the Fair Work Act 2009 (Cth) unless otherwise specified.

2 Fair Work Act 2009 (Cth) s 311(1).

3 Ibid 311(3) to (6).

4 Ibid s 22(5).

5 Ibid s 22(7).

6 Corporations Act 2001 (Cth) s 50AAA.

7 Fair Work Act 2009 (Cth) s 22(7).

8 Ibid s 91(1).

9 Ibid s 122(1).

10 Ibid s 122(3).

11 Long Service Leave Act 1992 (Vic) s 60(3).

12 Ibid s 60(6).

13 Fair Work Ombudsman, Employee entitlements on a transfer of business (2010), Australian Government .

14 Fair Work Act 2009 (Cth) s 312(1).

15 Ibid s 313(1).

17 Ibid s 382.

18 Ibid s 383(a); 23(1).

19 Ibid 383(b).

20 Ibid s 22(5); 384(1).

21 Ibid s 384(2)(b).

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Glossary & Acronyms

Associated entities.

Associated entities are businesses or other bodies that are connected to each other in some way. For example, when 1 business owns or controls the other business for the purpose of a transfer of business. Section 50AAA of the Corporations Act provides a full definition.

The Fair Work Ombudsman acknowledges the Traditional Custodians of Country throughout Australia and their continuing connection to land, waters, skies and communities. We pay our respects to them, their Cultures, and Elders past, present and future.

  • Fair Work Online: www.fairwork.gov.au
  • Fair Work Infoline: 13 13 94

Need language help?

Contacting the Translating and Interpreting Service (TIS) on 13 14 50

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Call through the National Relay Service (NRS):

  • For TTY: 13 36 77 . Ask for the Fair Work Infoline 13 13 94
  • Speak & Listen: 1300 555 727 . Ask for the Fair Work Infoline 13 13 94

The Fair Work Ombudsman is committed to providing you with advice that you can rely on. The information contained in this fact sheet is general in nature. If you are unsure about how it applies to your situation you can call our Infoline on 13 13 94 or speak with a union, industry association or a workplace relations professional.

Printed from fairwork.gov.au Content last updated: 2024-02-26 © Copyright Fair Work Ombudsman

IMAGES

  1. Fair Work Amendment (Transfer of Business)

    transfer of business fair work act

  2. What is a transfer of employment?

    transfer of business fair work act

  3. What is a transfer of business under the Fair Work Act

    transfer of business fair work act

  4. Changes to the Fair Work Act for JobKeeper

    transfer of business fair work act

  5. It Pays to Know the Changes to the Fair Work Act

    transfer of business fair work act

  6. UNDERSTANDING THE FAIR WORK ACT

    transfer of business fair work act

COMMENTS

  1. Employee entitlements on a transfer of business

    When there is a transfer of business a new employer has to recognise an employee's service with the old employer when working out most of their entitlements, including: sick and carer's leave requests for flexible working arrangements parental leave. However, there are some entitlements that the new employer might not have to recognise.

  2. FAIR WORK ACT 2009

    When does a transfer of business occur (d) there is a connection between the (3) to (6). (2) An in relation to whom the requirements in (1) (a), (b) and (c) are satisfied is a (3) There is a connection between the if, in accordance with an arrangement between: (a) the (b)

  3. When businesses change owners

    Employment conditions When businesses change owners Change of business owners often occurs where there is a sale of business. It is also known as a transfer of business. This can affect an employee's entitlements. On this page: What's a transfer of business? What covers employees during a transfer of business? Tools and resources

  4. What is a transfer of employment?

    What is a transfer of employment? Periods of service as a casual employee What is a genuine redundancy? What is the Small Business Fair Dismissal Code? What makes a dismissal unfair? Making an application Objecting to an application Commission process - conciliations, hearings and conferences

  5. Employee Entitlements in Transfer of Business

    A transfer of business happens when all the following criteria are met, as specified in the Fair Work Act: When the employment contract between the transferring employee and old employer ends When the new employer hires the transferring employee within three months of termination

  6. What is a transfer of business under the Fair Work Act

    For the purposes of the Fair Work Act, a transfer of business occurs when (a) the employment of an employee of the old employer has terminated; (b) within 3 months of the termination, the employee becomes employed by the new employer;

  7. Transfer of business and transfer of employment under the FW Act

    This note provides an overview of considerations for employers in relation to the transfer of business and transfer of employment provisions under the Fair Work Act 2009 (Cth) (FW Act). These considerations most commonly arise in the context of an asset purchase acquisition, internal restructure or outsourcing or insourcing of labour. The potential implications arise in the areas of employee ...

  8. Transfer of business

    24 September 2021 The transfer of business provisions under the Fair Work Act 2009 apply where a business is transferred from one national system employer to another. This includes some insourcing and outsourcing arrangements and covers some changes of employer within corporate groups.

  9. Federal Register of Legislation

    29 Interaction of modern awards and enterprise agreements with State and Territory laws. 30 Act may exclude State and Territory laws etc. in other cases. Division 2A—Application of this Act in States that refer matters before 1 July 2009. 30A Meaning of terms used in this Division. 30B Meaning of referring State.

  10. Factsheet

    Under the Fair Work Act, a 'transfer of business' occurs when an employee or employees transfer to a new employer within 3 months of leaving the old employer, and the work the employee is doing is substantially the same as he or she was doing with the old employer.

  11. Transfer of Business

    The Fair Work Act 2009 provides that the following "workplace instruments" will continue to cover the transferring employees on transfer of business: An enterprise agreement approved by the Fair Work Commission, a collective agreement, a preserved individual or collective state agreement, an Australia Workplace agreement, an Individual ...

  12. The Fair Work Act

    The transfer of business provisions under the Fair Work Act 2009 (Cth) ('the Act') covers situations when there is a transfer of business. The second business owner must recognise the employee's services when working out most of their entitlements. At the same time, there are also certain entitlements that the employer does not have to recognise.

  13. What is an "arrangement" for purposes of a transfer of business?

    Australia March 8 2013. A Full Bench of the Fair Work Commission ( FWC) has recently clarified what constitutes an "arrangement" between an old and a new employer for purposes of determining ...

  14. Transfer of business and consequences for Employment Agreements

    What 'arrangements' establish a transfer of business pursuant to s 311(1) of the Fair Work Act 2009 (Cth) (the Act) between a successful tender bidder and prior service provider so as to ...

  15. Apply for an order on transfer of business (Form F40)

    Apply for an order on transfer of business (Form F40) With a transfer of business, any industrial instrument that previously covered an employee of the only employer will transfer to cover an employee of the new employer.

  16. PDF Transfer of business and outsourcing

    Under s 311 of the FW Act, a transfer of business takes place when all of the following are satisfied: the employment with the old employer has terminated; the employee became employed by the new employer within three months of the termination; the work the employee performs for the new employer is the same or substantially the same; and

  17. Transfer of Business Under the Fair Work Act

    The Fair Work Act 2009 (Cth) has redrafted the old 'transmission of business' provisions for awards and agreements as new 'transfer of business' provisions. The new provisions differ considerably from the immediately prior Work Choices rules, and they also mark a change from the pre-Work Choices law.

  18. Transfer of business

    Transfer of business and transfer of employment under the FW Act • Maintained Unfair dismissal under the Fair Work Act • Maintained Practice notes Asset purchases • Maintained Employment due diligence: acquisitions • Maintained Intra-group reorganisations • Maintained Modern award coverage • Maintained

  19. Selling a business and the transfer of employee entitlements

    Transfer of business under the Fair Work Act. The transfer of business provisions under the FW Act refer to the transfer of a business from one employer to another and impose obligations on both the new employer and the old employer. Pursuant to section 311(1) of the FW Act, there is a transfer of business between the old employer and the new ...

  20. Federal Register of Legislation

    29 Interaction of modern awards and enterprise agreements with State and Territory laws. 30 Act may exclude State and Territory laws etc. in other cases. Division 2A—Application of this Act in States that refer matters before 1 July 2009. 30A Meaning of terms used in this Division. 30B Meaning of referring State.

  21. PDF Illuminating the operation of the transfer of business provisions in

    an industrial instrument to 'transfer' for purposes of the transfer of business provisions in Part 2-8 of the Fair Work Act 2009 (Cth) (FW Act), the work performed by a transferring employee for a new employer must be 'the same, or substantially the same' as the work the employee performed for the old employer. Background 1 [2021] FCA 8.

  22. associated entities

    associated entities. Associated entities are businesses or other bodies that are connected to each other in some way. For example, when 1 business owns or controls the other business for the purpose of a transfer of business. Section 50AAA of the Corporations Act provides a full definition. The Fair Work Ombudsman acknowledges the Traditional ...

  23. Gambling with transfer of business under the Fair Work Act

    The provisions of Part 2-8 of the FW Act are intended to ensure that EAs that apply to a given employer (Old Employer) 'transfer' to, and become binding upon, another employer (New Employer ...

  24. Activating the new Department of Labor Fair Labor Standards Act changes

    The Department of Labor has recently adopted changes to the Fair Labor Standards Act (FLSA) Salary Threshold Test for employees and to the treatment and classification of Independent Contractors. Join us as we outline compliance timelines and review companies' immediate considerations for implementation. We'll discuss:

  25. When Can the Covenant of Good Faith and Fair Dealing Be Invoked?

    The implied covenant of good faith and fair dealing is often misunderstood. "Good faith" in context of the covenant has a different meaning than when used to judge a party's conduct. The covenant is not an opportunity to obtain rights that were not bargained for at the time of contracting.