Sale of business and enterprise agreements

Under the Fair Work Act, an enterprise agreement will continue to apply to regulate the minimum terms and condition of employment which apply to the employment of the employees covered by it, after it passes its mandatory nominal expiry date, until it is terminated; see secs 219, 222, 223 and 225.

An enterprise agreement is a “transferable instrument” (sec 312) for the purposes of the Act, which means that if there is a transfer of business (as for what qualifies see sec 311) an applicable enterprise agreement will continue to apply to the employment of employees covered by the agreement until it is terminated.

A transfer of business occurs when (a)an employee begins working for the new employer within 3 months of ending their job with a previous employer, (b) the employee’s duties are the same or nearly the same as they were for the previous employer and (c) there is a connection between the previous and new employers (as to which see sub-sec 311(4))

However this will not be the case for new employees unless the employer remains the same, which would be the case if there was no change to the identity of the employer, for example in the sale and acquisition of a business by the purchaser acquiring the shares of the former corporate owner. A fortiori, in that legal situation, there would be no transfer or transmission of business.

Where there is a sale and acquisition of a business in circumstances in which there is a change to the legal identity of the employer (in which case the purchaser of the business will be a different legal entity to the employer expressly covered by an enterprise agreement) there will be a transfer of business within the meaning of sec  312 provided that the transaction meets the requirements of sec 311.

In this situation there will be two distinct categories of employees namely

  • employees who worked for the old employer; (called transferring employee) and
  • employees whose employment commences after the transfer of business (called a non-transferring employee).

As for (a) the employees will continue to be covered by the enterprise agreement (ie the transferable instrument) to the exclusion of any other enterprise agreement or named employer award; see sec 313

As for (b) new employees (or as the Act terms them “new non-transferring employees of the new employer”) will only be covered by the existing enterprise agreement (the transferable instrument) if at the time the non-transferring employee is employed no other enterprise agreement or modern award covers the new employer and the non-transferring employee; see sec 314.

(As for transferring employees who are high income employees see sec 316).

Division 3 of Part 2-B of Chapter 2 of the Act deals with the powers of the Fair Work Commission to make orders in relation to a transfer of business.

Sec 318 empowers the Commission to make orders to the effect that a transferable instrument that would cover a new employer and a transferring employee does not or will not cover the new employer and the transferring employee and sec 319 grants the same power to the Commission to make an order that a transferable instrument that would cover the new employer and a non-transferring employee does not or will not cover the non-transferring employee.

For an example of the circumstances in which a new employer may seek to obtain a sec 319 order to facilitate an enterprise agreement which is a transferring instrument applying to new employees see Re BU Mackay Pty Ltd [2019] FWC 8439 in which a company which had acquired a new business was successful in obtaining an order the effect of which was to apply the applicable enterprise agreement which applied to the workforce of the old employer to apply to them and new employees after the acquisition.