I am often asked whether an employer can avoid an obligation to pay statutory redundancy where it arranges for the affected employee (whose employment is coming to an end through redundancy with employer1) to be offered a position with another company (employer2). Under sec 122 of the Fair Work Act, the obligation to pay statutory redundancy can be avoided by employer1 in two situations.
The first is where the employee becomes employed by employer2 within 3 months after the termination of employment with employer1 and employer1 and employer2 are related entities.
The second is where the employee is a transferring employee in relation to a transfer of business from employer1 to employer2 and they are not related entities.
The transfer of business between employer1 and employer2 is typically the sale by employer1 to employer2 of a business or part of a business, but under sub-sec 311(4) of the Act it also includes the situation under which employer1 outsources the transferring work to employer2 and the work is substantially the same from the perspective of the employee (sub-sec 311(1)c)).
In either of the above cases, the employee’s service with employer1 will count as service with employer2. Furthermore, the period between the termination of employment with employer1 and the commencement of employment with employer2 does not break the employee’s continuous service with both employer1 and employer2.
If the above transaction occurs between employers which are not related entities, and employer2 provides the employee with notice to the effect that it will not recognize the period of service with employer1, employer1 remains liable to pay statutory redundancy (and employer2 does not inherit an accrued annual leave liability (sub-sec 22(5)(b)).
If an employee rejects an offer of employment by employer2 in any of the above situations, and the employment offered is on terms and conditions (including remuneration presumably) substantially similar to the employment with employer 1 and “considered on an overall basis”…is…”no less favourable” than the employment with employer1 and employer2 recognizes the employee’s service with employer1, employer1 is not liable to pay statutory superannuation.
Still with me??