[ Employment Law Tip ]
Transfer of Business and Employment Rights
Sales and transfers of businesses are a common occurrence in the modern economy. Owners may sell or purchase businesses for various commercial reasons. When such transfers occur, it is obviously unreasonable to automatically require a purchaser to undertake all the employees that were employed by the seller of that business. However, it is also unreasonable to disregard certain rights and entitlements of employees purely because there was a transfer of ownership of the business. Employment rights must still be adequately protected, and this article will explore the different implications that a transfer of ownership may have on employees.
Employment Rights and Entitlements in a Change in Ownership
Most transfers of business will indicate a transfer from one entity to an unrelated entity. In such circumstances, the transferee, or buyer, of the business will become a new employer. Generally speaking, any employees who continue to work at the business upon transfer, referred to as transferring employees, will commence a new employment relationship with the new employer. It should be noted that not all employees may be transferred to the new employer, and it is generally an obligation of the new employer to offer employment to the employees it wishes to continue to engage. Where no offer of employment is made, the termination of such employees must be properly handled by way of acknowledging notice periods, redundancy payments and payments of outstanding wages and paid leave entitlements.
In the case of transferring employees, although a new employment relationship commences, the new employer is usually obliged to recognise the transferring employee’s past employment period with the previous employer when calculating entitlements such as:
- Personal leave
- Parental leave
- Requests for flexible working arrangements
However, it may be agreed between the seller and buyer of the business that the new employer may not be obliged to recognise a transferring employee’s employment period with the seller for the purposes of determining entitlements such as:
- Annual leave
- Long service leave
- Notice of termination periods
It is important to note that the above recognitions and determinations are able to be freely discussed and agreed between the seller and buyer of the business by way of specially drafted terms. However, there usually exists standard terms and conditions that apply should there be an absence of specially agreed terms. For example, in Queensland, the Real Estate Institute of Queensland (“REIQ”) publicly provides a Standard Conditions of Sale Contract for business which outlines how employees are to be dealt with by the parties to the transfer.
Employee’s Rights When They Are Not Properly Managed During a Transfer of Business
The rights and entitlements of employees do not vanish or become void simply due to a transfer of the business. All lawful entitlements to paid leave and other rights such as proper notice periods remain valid – it is a matter of which party is liable to rectify the entitlements. Whether the transferor or transferee of the business are liable will be determined with reference to the terms and conditions of the transfer agreement applicable to the parties.
If you believe that you have been subject to improper management throughout a transfer of business, or if you require further advice, please contact our team of Employment Law Experts at Park & Co Lawyers.
