+ Employment Issues on Sale of Business

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Employment Issues on Sale of Business

Amora Hotel Jamison, 11 Jamison St., Sydney

30 November 2006

Prepared and presented by Leigh Adams

Principal,  Leigh Adams Lawyers

Workchoices and Transmission of business

When is there a transmission of business? Two cases in this area which are relevant are The Minister for Employment and Workplace Relations –v- Gribbles Radiology P/L (2005) 138 IR 252 and PP Consultants P/L –v- Finance Sector Union (2000) 201 CLR 648.

The rationale which appears from both cases is that you need to compare the activities of the old employer with the activities of the new employer and determine whether it can be said that a business or a part of business has actually transferred from one to the other. It is not enough if there is a continuity of employees or even if the activities undertaken by both employers are very similar.

Part 11   (ss. 577 – 606) of the Workplace Relations Act 1996 (Cth) (WR Act) defines a “transferring employee”. It includes former employees and prospective employees. A person can be a transferring employee if they were employed by the old employer immediately before the transmission and then by the new employer within two months after transmission – see s.581 (1).

Additionally, a person is a transferring employee if their employment is terminated within one month of the transmission for genuine operational reasons or reasons which include genuine operational reasons and they become employed by the new employer within two months after the time of transmission – s. 581 (2).

s. 583 deals with the transmission of a post-reform AWA and there are other sections dealing with the transmission of pre-reform AWAs, pre-reform awards and post-reform collective agreements, the application of the Fair Pay and Conditions Standard and Notional Agreements preserving State Awards and Transitional Awards.  

If you think that that is confusing, then it does not stop there. You have to look at each of the potential transfers from the point of view of :

1. the vendor and purchaser both being covered by workchoices;
2. only the vendor being covered by workchoices;
3. Only the purchaser being covered by workchoices;
4. neither the vendor nor the purchaser being covered by workchoices.

The effect of sections 581 and 583 is that the applicable AWA or award or collective agreement by and large continues in application for twelve months after the time of transmission.

s. 582 (1) and s. 582 (2) provide, amongst other things, that where the nature of the employment changes, or where the new employment is such that the relevant

instrument is not capable of applying to that employee, then that employee ceases to be a “transferring employee”.

In addition, a new AWA can replace a transmitted collective agreement (s. 583 (2)(b)) or a transmitted award (s. 595 (3)(a)). Further, a new collective agreement can replace a transmitted award (s. 595 (3)(b)) or a transmitted collective agreement (s. 587 (3)).

Moreover, either the outgoing employer or incoming employer can apply under s. 590 of the Australian Industrial Relations Commission for an order that the incoming employer is not or will not be bound by a collective agreement or is only bound to the extent of the order.

What about leave entitlements? They are a lot easier. Long Service Leave – the same rules as before continue to apply. Long Service Leave is not covered by workchoices, and any employee who becomes employed by the purchaser takes the accrued long service to the purchaser. Sick Leave – sick leave accruals do not go to the purchaser unless the purchaser agrees in advance. Annual Leave – Annual leave accrual does not go to the purchaser unless the purchaser agrees in advance. Parental Leave accumulation and entitlement – goes across to the purchaser irrespective of any agreement. 

Notices and Civil Penalties Provisions

The new requirement to issue notices under Part 11, Schedule 6 or Schedule 9, is critical, because the new employer can be fined for not doing so. The fine can be up to $33,000 for a corporation and up to $6,600 for an individual.

The new employer, upon becoming bound by an award, collective agreement or AWA by the transmission of business provisions, must, under s. 602, take reasonable steps to give the transferring employee a written notice complying with s. 602 (3).

These notices have to be lodged with the Office of the Employment Advocate within fourteen days of being given to the employee – s. 603 (1).

Furthermore, a notice has to be given by the old employer to the new employer under s. 599 (4) advising the new employer of those transferring employees who have parental leave entitlements under the Australian Fair Pay and Condition Standard.

By and large, these notices have to be given within fourteen days after the transmission of the business or part of the business. 

After twelve months – then what?

After the twelve month “transmission period” ceases, the employee will be covered by such instrument as applies to him or her whether it be an Australian Workplace Agreement or a collective agreement. The WR Act now provides for six different types of workplace agreements and in the absence of any such workplace agreement, the Australian Fair Pay and Condition Standard applies.

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