Transfer of Business (Instruments)
The Fair Work Act 2009 states that a transfer of business occurs in a range of circumstances, not just a sale of a business or similar transaction.
When Does A Transfer Of Business Occur?
There is a transfer of business from an employer (the “old employer”) to another employer (the “new employer”) if the following requirements are satisfied:
- The employment of an employee of the old employer has terminated;
- Within 3 months after the termination, the employee becomes employed by the new employer;
- 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;
- There is a connection between the old employer and the new employer as described in any of the “connecting circumstances” below.
Transfer Of Assets From The Old Employer To The New Employer
There is a connection between the old employer and the new employer if, in accordance with an arrangement between:
- The old employer or an associated entity of the old employer; and
- 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) that:
- The old employer, or the associated entity of the old employer, owned or had the beneficial use of; and
- Relate to, or are used in connection with, the transferring work.
Old Employer Outsources Work To The New Employer
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 The Old Employer
There is a connection between the old employer and the new employer if:
- 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 previously outsourced the transferring work to the old employer (or an associated entity of the old employer); and
- The transferring work begins to be 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 An Associated Entity Of The Old Employer
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. Associated entities under the Fair Work Act has the same meaning as under the Corporations Act 2001, which states that ‘entities’ are ‘associated entities’ in a range of circumstances, including but not limited to:
- Where one entity ‘controls’ the other (for example, where one entity can make decisions about the other’s financial and operating policies);
- Where a third entity ‘controls’ and has a material interest in the operation resources or affairs of both entities;
- Where both entities are ‘related bodies corporate’ (for example, holding companies or subsidiaries of one another).
What Happens When A Transfer Of Business Occurs?
So what is the fuss about? What actually happens when all of the above conditions are satisfied, and a ‘transfer of business’ has occurred between 2 parties?
The instrument covering the transferring employee may transfer with them to the new employer
Provided they are covered by a “transferable instrument” the transferring employees will bring the industrial instrument covering their employment with the old employer. This instrument will then apply to their employment with the new employer in relation to the transferring work (being work that is the same, or substantially the same, as the work the transferring employees performed for the old employer). This transferring instrument will apply to the new employer and the transferring employee even if the new employer has their own enterprise agreement, or is named in a modern award, at the time of the transfer.
The transferable instrument may also apply to new, non-transferring employees performing the same work
If a transferable instrument transfers with a transferring employee to the new employer, it may also apply to new, non-transferring employees hired after the transfer, if they are performing the same work as the transferring employee(s). However, this will only occur if there is no other modern award, enterprise agreement, or “award-based transitional instrument” or “agreement-based transitional instrument” (a list of these is below), which could apply to the new employer and the new employee.
Which Instruments Can Transfer?
So what exactly can be transferred across in the transfer? Each of the following is considered a “transferable instrument” which may transfer in a transfer of business:
- An enterprise agreement that has been approved by the Fair Work Commission;
- A workplace determination (a workplace-related order made by the Fair Work Commission with respect to matters such as wages, bargaining and industrial action);
- A named employer award (a modern award that is expressed to cover one or more named employers).
Transfer Of Other Entitlements
A new employer will also need to consider the transferring entitlements (such as leave and other service-related entitlements) the transferring employees have brought with them from the old employer.
About Employment Innovations
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The information provided in these knowledge base articles is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information applies to your specific situation we recommend you contact Employment Innovations for advice.
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