If an employer transfers their business to someone else, this can have an effect on employees’ employment and entitlements.
Where there is a transfer of business the Fair Work Act 2009 sets out that some industrial instruments known as 'transferable instruments' (for example an enterprise agreement) will also 'transfer' to the new employer.
The entitlements accrued with the old employer, such as annual leave, may also transfer to the new employer. However, this is not always the case. The previous employer may have agreed to pay out some of the employee's existing leave entitlements before the transfer of business.
What's a transfer of business?
A transfer of business between an old employer and new employer takes place when all of the following occur:
- an employee is employed by a new employer within 3 months of the employee ending their employment with a previous employer
- the work an employee does is the same or substantially the same as the work they did for their previous employer
- there is a “connection” between the previous employer and the new employer.
How do you know if the new and previous employers are connected?
This will depend on your circumstances. For example it may be:
- in the event of a sale of some or all of the assets of the old employer to the new employer (that is, very generally, a sale of the business or part of the business)
- when the employers are ‘associated entities’ (essentially if they are related bodies corporate or one has some controlling interest in the other)
- when the old employer outsources the work the employee does to the new employer
- when the new employer ceases to outsource work to the old employer.
What's a 'transferable instrument'?
This means:
- an enterprise agreement that has been approved by Fair Work Australia
- some modern awards and modern enterprise awards
- a workplace agreement that's in operation
- workplace determination that’s in operation
- a pre-reform award
- a state reference transitional award
- a notional agreement preserving a state award
- a preserved state agreement (individual and collective)
- an Australian workplace agreement (AWA) (including an AWA made before 27 March 2006)
- a certified agreement made before 27 March 2006
- an old Industrial Relations agreement
- a section 170MX award
- preserved redundancy provisions (in certain circumstances)
- a Division 2B State instrument.
Where there is a transfer of business a transferable instrument covers you until it ceases to operate or is replaced by another instrument that covers the employee, such as a new enterprise agreement.