Employment Lawyers NSW

Why do I need to know?

I’m going to answer the second question first, because that’s where the unexpected “sting” is.

When there’s a transfer of business, and the new business owner takes on an employee of the former business owner, then the new business owner:

  1. has to recognise the service of any such employee with all of the business’s former owners (“the former service”) when working out most of their entitlements, including:
    – personal (sick and carer’s) leave;
    – requests for flexible working arrangements; and
    – parental leave.
  2. can choose to not recognise the former service when working out the employee’s entitlements in relation to:
    – redundancy;
    – annual leave;
    – long service leave;
    unfair dismissal;
    – notice of termination.

However, to be able to not recognise such service the new business owner cannot be connected to the former business owner and each relevant employee must prior to employment with the new business owner, been given a notice in writing by the new business owner confirming that their former service would not be recognised in relation to any one or more of: redundancy, annual leave, long service leave, unfair dismissal or notice of termination.

When is there a “transfer of business”?

Most obviously, when there is a sale of business.

Less obviously, when:

  • an employee begins working for the new business owner within 3 months of finishing their employment with the former business owner; and
  • the employee’s duties are substantially the same as they were with the for the former  employer; and
  • there is a “connection” between the former and new business owners.

There could be a “connection” between the business owners if one or more of the following occur:

  • the former business owner sells some or all of the business’s “assets” to the new business owner; or
  • the business owners are related bodies corporate or one has a controlling interest in the other; or
  • the former business owner outsources the work the employee does to the new business owner; or
  • the new business owner stops outsourcing work to the former business owner.

The situations that I’m aware of, and where the “sting” arose, involved not buying a business, just some assets of a dying business. Then employing a former employee (of more than 5 years) of the deceased business within 3 months of him ceasing employment in the deceased business… the result being the new employee before his first day was already entitled to long service leave on termination of his employment if it didn’t work out.

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