The fair work implications of buying and selling a business Part 2
Sale of business with no change of employer
When a business which employs people is sold and purchased there may or may not be a change in the identity of the employer. I do not know whether there are any statistics available, but I would hazard a guess that a significant proportion of such transactions are completed by the purchaser acquiring the vendor’s shares in a company which is the employer. In such cases it is quite common for there to be no change whatsoever in the legal identity of the employer from the employees’ perspective, and other than perhaps a cultural change, the transaction may be completely seamless to those employees, whose employment conditions and accruing and accrued entitlements might not be affected one little bit. The change may at most be of academic interest to those employees. This is how most M & A corporate activity plays out. In these cases there is no change of employer possibly other than on the share register.
In comparison, the identity of the employer may well change if the sale of the business is effected by a transfer of assets and liabilities from one party to another. The vendor may be a company (more strictly a corporation under Australia law) or a sole trader, or a combination of both in a legal partnership. If there is to a legal change in the owner of the business, it follows that the employees will, if their employment survives the transaction have a new employer.
But what effect will that change have on the employees’ rights?
A useful starting point in this context is to identify what rights the employees may have which are capable of being affected by a sale of the business which employs them in circumstances where there is a change of employer.
There are two sources of those rights, namely (a) legislation and (b) the contract of employment, called by lawyers a contract of service to distinguish it from a contract for services which is the term used for the legal relationship between a principal and an independent contractor.
Some of the legislative (or statutory) rights which an employee has which stand to be affected by a transfer of employment when a business is sold include the following
Notice of termination
Accrued annual and personal leave
Long service leave
Remuneration and conditions
Those contractual entitlements which might be affected are any entitlements and conditions which are more generous to the employee than the minimum safety net statutory entitlements provided for by the Fair Work Act, the National Employment Standards and any applicable modern award or enterprise agreement.
To be continued