One of the subtlest changes made in the transition from WorkChoices to the Fair Work Act 2009 (“FWA”) is what now constitutes a transfer of business. Stephen Hughes, Partner for Workplace Law at msl | michael sing lawyers, sheds some light on this issue.
The importance of a transfer of business is that certain employer obligations under some industrial instruments will be transmitted with employees to the new employer. These obligations may include annual and long service leave entitlements and the recognition of commencement dates with the old employer for the purpose of accruing entitlements such as parental leave or redundancy.
The Rudd government, in framing this portion of the FWA, was clearly seeking to address not just the usual scenarios of the buying and selling of businesses but also unconscionable and opportunistic practices where transferring employees’ entitlements were not honored. The attempt to eliminate these practices in a few brief provisions however means that this portion of the FWA has far wider application than was perhaps contemplated, or at least more than many people realise.
Given the post GFC surge in liquidations, mergers, buyouts and acquisitions of businesses, it is very important to understand how widespread the application of these new provisions and their consequences are.
So what constitutes a transmission of business (TOB)?
“A TOB most commonly arises through a sale of a business, with the new employer inheriting those employees of the business as negotiated in the contract, generally on the existing terms and conditions in place pre-acquisition,” says Stephen Hughes.
However, the new provisions focus less on the formal transfer of a discernible business or entity but more on the movement of equipment and employees. So under the FWA, there is a TOB if:
(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; or
(d) there is a connection between the old employer and the new employer.
Moreover, there is a sufficient connection between the old and new employer if the new employer purchases or has the beneficial use of some of the assets of the old employer used to perform the transferred work; the old employer outsources the transferring work to the new employer (or vice versa); or the new employer is an associated entity of the old employer.
“By way of example as to how wide the application of these provisions can be,” said Mr Hughes; “consider company A and company B competing for a government tender.”
“A, the current incumbent, is unsuccessful and having lost the work is unviable and goes into liquidation.”
“B is successful and needs to purchase additional equipment and recruit extra staff in order to service the tender work.”
“If B happens to purchase, even at auction, any of A’s assets and hires through advertisement any of A’s former staff within 3 months of them losing their jobs, then there has been a TOB”.
Furthermore, there is nothing in the legislation that limits TOB to full and part-time employees - as long as there is a connection between the old and new employer, the rules still apply.
So if it is a TOB what is the effect of the FWA?
“If the TOB provisions apply, then the new employer is obliged to give the transferring employees the same terms, conditions and pay as they received under the industrial instrument that they were employed under with the old employer – even if the new employer has its own industrial instrument applying to the balance of its workforce,” says Mr. Hughes.
Another substantial change from WorkChoices is that this application of the transferring industrial instrument is not of a temporary statutory duration, but is for an indefinite period until the workplace industrial instruments are renegotiated across the new employer’s workforce.
As a result Mr. Hughes strongly recommends that businesses moving into an acquisitive phase should conduct effective due diligence reviews of both assets and potential new recruits, as they may otherwise be acquiring far more than they bargained for.
“Remember, if in doubt about any of the new requirements, it is always best to seek help first, rather than paying a hefty price later,” advises Mr Hughes.
Stephen Hughes practices exclusively in workplace law and presents monthly seminars at msl’s workplace division, Workplace Law Queensland, for clients and the public on this constantly changing area of law. msl is one of Queensland’s largest full-service law firms with offices located in Brisbane CBD and the Gold Coast. It has been recognised for its achievements and was highly placed in the 2008 and 2009 Queensland 400, an award naming the 400 best performing private companies for the year by Queensland Business Review.
To contact Stephen Hughes, or for more information on msl, visit our website www.mslawyers.com.au or call us on 07 5597 8888 (Gold Coast) or 07 3229 6099 (Brisbane).
|
