Fair work implications of the sale of a business; Part 7
I have dealt in previous posts of this particular series with the legal implications in general for employees of the sale of the business of an employer, and in particular with service with the vendor for the purposes of statutory redundancy entitlements.
If there is a transfer of the business from one associated entity to another, the employee’s accrued entitlements will be deemed to have been transferred across (sec 22(5). If the transaction is not between associated entities, the period of service with the vendor will have no value to the employee unless the purchaser agrees to recognize the employee’s service with the vendor (sec91) in which case the employee will be entitled to be paid an amount for the period of untaken paid annual leave accrued with the vendor.
Sick and carer’s leave, requests for flexible working arrangements and parental leave
The legal burden of these are transferred from the vendor to the purchaser irrespective of the terms of the transaction.
Long service leave
Long service leave is a State based entitlement, although the Fair Work Act and modern awards under the national fair work system apply the entitlements in an indirect way. In Western Australia long service leave entitlements are provided by the Long Serve Leave Act 1958 (WA) which provides that irrespective of the commercial terms in a sale between the vendor and the purchaser of a business which has employees, if the transaction constitutes a “transmission of business” (defined in sub-secs 6(4) and 6(5) and with a slightly different meaning to the Fair Work Act’s “transfer of business”) the liability will be assumed by the purchaser because the employee’s service with the vendor will deemed to be “continuous service” with the purchaser and thus be carried across in the transaction. The value of long service leave can only be “cashed out” by the employee under very strictly defines circumstances.
The national fair work system under the Fair Work Act provides that an employee is protected from unfair dismissal if certain conditions are met including a qualifying minimum length of employment with that employer, more than 6 months with a non small business employer and more than 12 months with a small business employer (for the meaning of which see sec23).
However if the sale of a business is transacted so that an employee is a “transferring employee” (see sub-sec 311(2)), an employee’s service with the vendor will be deemed to count as service with the purchaser for the purpose of unfair dismissal protection unless the vendor and purchaser are not “associated entities” and the purchaser has informed the employee in writing that his or her service with the vendor will not be recognized.
Notice of termination
The length of notice of termination or pay in lieu required under sec 117 will depend upon whether the employee’s employment was terminated by the vendor and whether previous service with the vendor will be deemed continuous with the purchaser. Curiously the Fair Work Act is silent about the implications of the statutory requirement to provided notice of termination in a transfer or transmission of business.
In Cerin V ACI Operations Pty Ltd (2015) FCCA 276, the federal Circuit Court imposed personal civil penalties upon both an employer and its Human Resources manager for their “bizarre” failure to provide an employee with adequate notice of termination or pay in lieu.
These should always, and in some cases must, be transferred across from the vendor to the purchaser if the purchaser is taking on any of the vendor’s employees.
When there is a transfer of a business of the kind which is expressly and specifically defined in sec 311 (which is slightly different from sub-sec 22(7)), a number of what are called “transferable instruments” (see sec 312) are deemed to apply to the employment of “transferring employees”.
Under sec 312 these instruments include an enterprise agreement, workplace determination (see sec 12), and a “named employer award”, a term which is one would think is self explanatory except for sub-sec 313(2) which “to avoid doubt” (sic) includes an individual flexibility arrangement.
If nothing at all has greater clarity for the reader of this series of posts, I hope that it is that the fair work legal implications involved in the sale of a business in Australia are intimidating to say the least.
Having gracefully retired from the legal profession, I am not now one to push the need for legal advice down the throats of my readers; but in as commercial transaction such as the sale of a business, I hope that the foregoing makes it clear that it will ALWAYS be required. You get what you pay for! Or a client who represents himself has a fool for a client.
Here, thank goodness, endeth the lesson.