LEGAL AND IR
15
NATIONAL
Transferring employees and their entitlements Whether selling or purchasing a business, members should know their rights and responsibilities regarding transferring employees.
What is a ‘transferring employee’?
Selling a business
Under the Fair Work Act 2009 (Cth), an employee is a ‘transferring employee’ where:
If you are selling your business, you must consider what will happen to your old employees. While you are not required to notify your employees of an imminent transfer of business, you must still provide the correct period of notice.
• The employee’s employment has been terminated, and • The employee is re-employed with the new employer within 3 (three) months after the termination, and
• The work is the same, or substantially the same, as the work the employee performed for the old employer.1
This means that if you purchase a business and hire an employee within 3 months of their termination by their previous employer, they are considered a transferring employee for the purposes of the Act.
Check your transfer of business contract Your transfer of business contract should contain clauses dealing with transferring employees. The contract may require the vendor to terminate all employees and pay out all remuneration and entitlements. It may also indemnify the purchaser against claims that arise as a result of those terminations. If you are uncertain about your obligations and responsibilities in the transmission of the business contract with regard to employees, MGA TMA can assist you.
Depending on the contents of your transfer of business contracts, employees may transfer to the purchaser if the purchaser agrees. You may be required to terminate the employees, providing the correct notice and paying out entitlements, including outstanding wages and allowances, annual leave and applicable loadings, and long service leave. If you have 15 or more employees, you may also be required to make redundancy payments to terminated employees.
Purchasing a business If you are purchasing a business, you may have the option to select which employees you would like to transfer to your new business. This should be set out in the transmission of the business contract for clarity between all parties. The contract can also state whether the employees retain their annual leave entitlements or whether the vendor is to pay the purchaser a portion of the transferring employees’ entitlements. Additionally, you should keep in mind that if the transferring employees were covered under a specific Enterprise Agreement, Award, or Individual Flexibility Arrangement, this instrument would cover you and the employee. 2
