Unfair dismissal and transferring employees

The law about transferring employee and minimum lengths of employment for protection from unfair dismissal is complex. Here it is explained.

“Section 382 of the Act sets out when a person is protected from unfair dismissal:

382 When a person is protected from unfair dismissal

A person is protected from unfair dismissal at a time if, at that time:

(a) the person is an employee who has completed a period of employment with

his or her employer of at least the minimum employment period; and

(b) one or more of the following apply:

(i) a modern award covers the person;

(ii) an enterprise agreement applies to the person in relation to the

employment;

(iii) the sum of the person’s annual rate of earnings, and such other

amounts (if any) worked out in relation to the person in accordance with

the regulations, is less than the high-income threshold.

[9] The only question is whether the Applicant completed the minimum employment

period. Sections 383 and 384 set out the meaning of ‘minimum employment period’ and the

method by which a period of employment is calculated.

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[10] The sections are expressed as follows:

383 Meaning of minimum employment period

The minimum employment period is:

(a) if the employer is not a small business employer—6 months ending at the

earlier of the following times:

(i) the time when the person is given notice of the dismissal;

(ii) immediately before the dismissal; or

(b) if the employer is a small business employer—one year ending at that time.

384 Period of employment

(1) An employee’s period of employment with an employer at a particular time is the

period of continuous service the employee has completed with the employer at that time

as an employee.

(2) However:

(a) a period of service as a casual employee does not count towards the

employee’s period of employment unless:

(i) the employment as a casual employee was on a regular and systematic

basis; and

(ii) during the period of service as a casual employee, the employee had

a reasonable expectation of continuing employment by the employer on

a regular and systematic basis; and

(b) if:

(i) the employee is a transferring employee in relation to a transfer of

business from an old employer to a new employer; and

(ii) the old employer and the new employer are not associated entities

when the employee becomes employed by the new employer; and

(iii) the new employer informed the employee in writing before the new

employment started that a period of service with the old employer would

not be recognised;

the period of service with the old employer does not count towards the

employee’s period of employment with the new employer.

[11] Where there has been a transfer of business and the employee is a transferring employee

and the relevant entities are not associated entities, then a transfer of employment will have

occurred, pursuant to s 22(7)(b) of the Act.

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[12] Where there is a transfer of employment, s 22(5) creates a prima facie obligation on the

new employer to include the period of service with the old employer. Only when the criteria of

s 384(2)(b) are satisfied is that obligation extinguished.

[13] A proper construction of s 384(2)(b) requires consideration of whether:

  • the employee is a transferring employee;
  • there has been a transfer of business from an old employer to a new employer;
  • the old and new employer were not associated entities at the time the employee became

employer by the new employer; and

  • the employee was notified in writing that the previous period of service would not be

recognised.

[14] If all the above criteria required by s 384(2)(b) are satisfied, then the period of service

with the old employer does not contribute towards the employee’s period of employment with

the new employer.

[15] In constructing s384(2)(b) the phrases “transferring employee” and “transfer of

business” must be considered. They are contained in The Dictionary (s 12 of the Act) and

require reference to ss 311(2) and s 311(1), respectively:

transferring employee, in relation to a transfer of business: see subsection 311(2).

transfer of business: see subsection 311(1).

[16] Section 311 of the Act states:

311 When does a transfer of business occur

Meanings of transfer of business, old employer, new employer and transferring work

(1) There is a transfer of business from an employer (the old employer) to another

employer (the new employer) if the following requirements are satisfied:

(a) the employment of an employee of the old employer has terminated;

(b) within 3 months after the termination, the employee becomes employed

by the new employer;

(c) 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;

(d) there is a connection between the old employer and the new employer as

described in any of subsections (3) to (6).

Meaning of transferring employee

(2) An employee in relation to whom the requirements in paragraphs (1)(a), (b) and

(c) are satisfied is a transferring employee in relation to the transfer of business.

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Transfer of assets from old employer to new employer

(3) There is a connection between the old employer and the new employer if, in

accordance with an arrangement between:

(a) the old employer or an associated entity of the old employer; and

(b) 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):

(c) that the old employer, or the associated entity of the old employer, owned

or had the beneficial use of; and

(d) that relate to, or are used in connection with, the transferring work.

Old employer outsources work to new employer

(4) 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 old employer

(5) There is a connection between the old employer and the new employer if:

(a) 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 outsourced the transferring work to

the old employer or an associated entity of the old employer; and

(b) the transferring work is 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 associated entity of old employer

(6) 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.”

Consideration

[17] In determining this application, I must ascertain the Applicant’s period of employment

with the Respondent. If the Applicant’s service with the old employer is included, then she will

satisfy the minimum employment period and will be protected from unfair dismissal. Section

384 sets out numerous criteria which I will consider in turn.

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  1. Section 384 (2)(a) – was the Applicant employed on a regular and systematic basis with

reasonable expectation of continuing employment.

[18] The Respondent states the Applicant was a casual employee for the 2.5 months she was

employed with the Respondent. The Respondent contests that the Applicant was not a regular

and systematic worker as she determined her hours worked which varied based on her personal

circumstances.

[19] On the Applicant’s payslips, the pay period from 30 August 2022 to 12 September 2022

states ‘Ritek Australia Pty Ltd’ with an annual salary of $75,000. The payslip containing the

pay period from 22 November 2022 to 5 December 2022 is identical, except that it states ‘Ritek

Technology Pty Ltd’. The rate of pay and the invoice are the same when the business was with

Ritek Australia Pty Ltd and when the business changed to Ritek Technology Pty Ltd during her

time of dismissal.

[20] I am satisfied that the Applicant was employed on a regular and systematic basis.

[21] Furthermore, the Applicant had a reasonable expectation of continuing employment

during the transition process. It appears that the Applicant was working in the Cooroy plant and

performing a variety of tasks and new management had asked her to transition out of some of

her existing roles so she could focus on drafting, a core skill she had performed previously. This

would indicate she had a reasonable expectation to continue employment with the Respondent

albeit with a specific focus upon drafting.

[22] I am also satisfied that the Applicant had a reasonable expectation of ongoing

employment.

  1. Section 384(2)(b)(i) – was the Applicant a transferring employee?

[23] In determining whether the Applicant was a transferring employee, there must be a

transfer of business per s311 of the Act. It is not contentious that the criteria set out in section

311(1)(a) and (b) have been met. There is contention between the parties regarding s311(1)(c)

regarding the Applicant’s new role with Ritek Technology compared to her existing role with

Ritek Australia.

[24] The Respondent states that the Applicant’s role had changed from drafting/scheduling

to logistics and material procurement when she was with Ritek Australia. However, the

Respondent required a transition of role back to drafting and scheduling to cope with the

workload, and that it was to be done over a 2-month period. The Applicant states that she was

doing both the drafting, scheduling and logistics, and that the logistics part of her roles would

be delegated to another staff member. The Applicant states the staff member was struggling

with the logistics aspect which left the position still requiring herself to be fully relied upon.

[25] In assessing whether the work the employee performs for the new employer is the same

or substantially the same as the work performed for the old employer, the Federal Court

decisions of Crown Sydney Gaming Pty Limited v United Workers Union [2022] FCA 97 by

Jagot J, and Community and Public Sector Union, NSW Branch v Northcott Supported Living

Limited [2021] FCA 8 by Katzmann J have provided the below principles:

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  1. the performance of the tasks comprising of the job1

; if the character of employment is

the same – meaning the substance of work rather than just the particular duties

themselves.

  1. Particular duties that may not be required or performed at any particular time would not

unduly interfere with the interests of employers in running their enterprises efficiently

would not change the substance of work.2

  1. the product or services of the company have not required the employee to significantly

retrain or upskill;

  1. “Employees are expected to adapt [themselves] to new methods and techniques

introduced in the course of employment.”3 However, it cannot be a completely different

kind of work.4

  1. the location where work is performed has no bearing upon the characterisation of work;5

[26] Although the Applicant had a larger focus on a different aspect of her role with Ritek

Technology compared to Ritek Australia, she was still undertaking aspects of her old role which

were of the same character with the new employer. The role which Ritek Technology provided

was an adaptation to business needs rather than requiring the Applicant to undertake a

completely different line of work.

[27] I am satisfied the Applicant is a transferring employee as defined by s 311(2).

  1. Section 384(2)(b)(i) – was there a transfer of business?

[28] A primary issue for determination is whether s 311(1)(d) has been satisfied, and

subsequently, whether there was a transfer of business pursuant to s 311(1). In order to

determine this, it is necessary to consider the provisions of ss 311(3) to (6) to ascertain if any

of them have been met. In this case, s 311(3) is the only potentially relevant subsection to

consider.

[29] In the current circumstances, where the new employer has purchased the business from

the old employer, there is clearly a transfer of assets. Therefore, s 311(1)(d) is satisfied and I

find there has been a transfer of business as defined by s 311(1).

[30] I am satisfied that both ss 384(2)(b)(i) and 22(7) are satisfied. There has been a transfer

of business and a transfer of employment under the Act.

  1. Section 384(2)(b)(ii) – were the old employer and new employer associated entities?

[31] There is no indication of control or significant influence between the entities as the old

employer Ritek Australia went into liquidation and is confirmed by ASIC through the Notice

of Appointment as Liquidator on 21 September 2022 and the Cooroy plant is now controlled

by Ritek Technology. Although Ritek Australia was likely to have been a part of a division of

the Ritek group, I am satisfied that there is no control or significant influence between the old

employer and new employer. Therefore, I am satisfied that that the old employer and the new

employer are not associated entities under s 50AAA of the Corporations Act 2001 (Cth).

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  1. Section 384(2)(b)(iii) – did the new employer inform the employee in writing before

employment commenced that the period of service with the old employer would not be

recognised?

[32] Section 384(2)(b)(iii) only requires the new employer to inform the employee in writing

before the new employment that their previous service would not be recognised. The Act does

not prescribe a criterion when determining if the employee acknowledges this fact, if it must be

specifically brought to their attention, or if they agree.

[33] In Gregory v Shaver Shop Pty Ltd [2016] FWC 1323, Gooley DP found that where there

is a transfer of business, the employer is obliged to make it clear to the transferring employee

whether service with the old employer will be recognised. Gooley DP states this is important

for two reasons. First, the employee will know that they will not be protected from unfair

dismissal for the qualifying period and second, it will assist the employee to determine if he or

she refuses the job offer whether he or she is entitled to redundancy pay. For these reasons the

written advice to employees should be clear.6

[34] The Applicant submits that she was not provided notice in writing that her previous

service with Ritek Australia would not be recognised, and the Respondent has not provided any

evidence which suggests that her period of service with the old employer would not be

recognised. I am not satisfied that the Respondent has complied with the obligation under s

384(2)(b)(iii).

  1. Sections 382(a) and 383(a) – was the Applicant a person protected from unfair

dismissal; did they satisfy the minimum employment period?

[35] By virtue of the operation of subsection 384(2)(b) of the Act, the Applicant’s period of

employment with the old employer is included as Ritek Technology Pty Ltd (the new

employer) failed to inform the Applicant that her period of service with Ritek Australia (the

olde employer) would not be recognised. Therefore, her previous employment with Ritek

Australia Pty Ltd should be recognised as a period of employment relevant to the minimum

employment period as prescribed by section 383 of the Act.

[36] The Applicant is a person protected from unfair dismissal and the jurisdictional

objection must be dismissed. The application will now be determined on its merits and my

Chambers will issue further directions.”

Extract from Buttenshaw v Ritek Technology  [2023] FWC 885 delivered 14 April 2023- Lake DP