The FWA provides a different scheme to deal with the transfer of employment rights and obligations if there is a "transfer of business" and a new employer takes on employees of the old employer.

The new transfer of business rules extend coverage to a wider range of transactions including outsourcings and company reorganisations. The 12 month limitation on transferring instruments is removed so transferring instruments now continue until they are terminated or replaced. A transfer of business will occur where:

  • An employee changes employer;
  • The work the employee does for each employer is the same or substantially similar;
  • There is a particular connection between the old and new employers (ie either a transfer of assets used in connection with the work, or an outsourcing, or an insourcing or where the two employers are "associated employers".

Transfer – Associated Entities Or "Transmission"

Where an employee transfers between associated entities (related bodies corporate) with no more than a three month break between the two employments or because he or she is a transferring employee in a transfer of business, service with the first employer counts as service with the second, but although any break does not count as service, it does not break continuity of service.

Service based entitlements that have been taken while with, or paid by the first employer (notice, annual leave, personal/carer's leave or long service leave, redundancy pay) are deducted off the entitlement with the second employer.

If the transfer is between non-related entities, the second employer is not required to recognise prior service for annual leave or redundancy pay. If the transfer is between non-related entities, and the new employer informed the employee in writing that the period of service with the first employer would not count, the employee starts a new "minimum employment period".

Service for the purposes of parental leave or requests for flexible working arrangements does not carry to the second employer.

Industrial instruments that could transfer with the business include Enterprise Agreements, named employer respondents modern Awards (other modern Awards would continue to apply on their terms) and guarantees of annual earnings for high income employees. Where the new employer does take on employees, the application of the "transferred instruments" is generally limited to those employees, plus any new employees the employer employs, where the workplace is instrument-free. This means that transfer of business may cause some employers to inherit Enterprise Agreements from other workplaces that will then apply to new employees that are employed post the transfer of business.

Donaldson Walsh will be running a series of Workplace Relations & Employment Law Seminars, during August and September 2009. For further information or to register please go to What's on at DW section of the Donaldson Walsh website.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.