Transfer of instruments under the Fair Work Act

Engaging in a transmission of business is an almost universal experience amongst members. Many members are well-practiced in this process having purchased and sold numerous stores as business owners.

Upon successfully purchasing a business, a modern award such as the General Retail Industry Award 2020, does not automatically apply to your business and to your employees. A transferable instrument, such as the previous owner’s enterprise agreement, may apply instead.

This may be the case if you employ a transferring employee, even if their employment was terminated by the previous owner and their entitlements were paid out before they commenced with you.

As the purchaser of a business, take steps to confirm whether an enterprise agreement will cover the employee and the business at settlement. Once you have done so, you can issue new contracts of employment with confidence. Taking this vital step before re-engaging an employee could save money and stress at a later date.

purchaser even after their employment is terminated by the seller.

A transferable instrument can be, for example, an enterprise agreement that has been approved by the Fair Work Commission and that is still in force.

What is a transferring employee?

Generally, under the Act, an employee is a transferring employee where:

• Their employment with the seller has terminated, and

• Within three months after the termination, the employee becomes employed by the purchaser, and

• The work performed by the employee is the same, or substantially the same, as the work the employee performed for the seller.

• An employee who does not meet this definition may not be a transferring employee.

When will a transferring employee be covered by a transferable instrument?

Importantly, please note that any employees who are not transferring employees will likely not be covered by the transferable instrument.

What steps can I take to check the coverage of my transferring employees?

It is important for any purchaser of a business to perform due diligence and check whether any current or legacy enterprise agreement applies to that business. We recommend you make these enquiries before you sign the transmission of business contract. If this is not possible, ensure to do so before the settlement date.

» Option 1: Make early enquiries with the seller

What is a

Transferable

instrument under the Fair Work Act?

The Fair Work Act 2009 (Cth) (the Act) prescribes that particular transferable instruments may continue to apply to an employee’s employment with the

As a general rule, if, immediately before the termination of the transferring employee’s employment with the seller a transferable instrument covered the seller and the transferring employee, then the transferable instrument will cover the purchaser and the transferring employee upon transmission of business.

At first instance, the seller of the business may be best placed to answer your enquiries regarding any existing enterprise agreements which cover, or use to cover, the store. If the seller confirms that an enterprise agreement applies, or used to apply, to their employees, we recommend that you request a copy of the enterprise agreement. If they are unable to provide a copy, ensure that they provide you with at least the name of the enterprise agreement, if known.

If the seller tells you that they are not sure whether an enterprise agreement applies, or cannot provide a copy, you can proceed to Option 2. We recommend that you do so even where the seller tells you that they don’t believe their agreement will apply to your business, which may not be accurate, or where the seller tells you that they have not given you permission to use their agreement, which is irrelevant.

» Option 2: Search for the agreement online

To confirm whether an enterprise agreement is still in effect, and from what date it was in force, we recommend that you search for a copy of the agreement online.

The Fair Work Commission has a Document Search function, available at the below web address:

• fwc.gov.au/document-search

We recommend that you make multiple searches, particularly where the name of a potential agreement is not known. You could try searching for the trading name of the store, the company or business name of the seller, and any previous names the store or the seller have traded as.