As M&A activity ramps up again, here are our top 5 employment issues to consider in a sale of business/assets:

  1. Offering employment: buyers have no obligation to offer employment to a seller's employees. If they don't, sellers are liable for termination payments, including leave and possible redundancy entitlements on completion (unless redeployment is possible). If you're a seller, you want provisions in the sale agreement around the terms of employment offers, to reduce redundancy exposure. If you're a buyer, don't risk employing the employees on the same terms and conditions, unless you know exactly what they are and have thought about whether that suits your business.
  2. Key employees: retaining key employees, having those employees sign up to employment contracts which protect the buyer's business interests, including considering retention bonuses, can be critical to the success of a purchase. Investing in change management and integration processes can maintain workplace culture and guard against losing key employees after completion.
  3. Employee consent: a common mistake is the assumption that employees can be automatically transferred between entities. Not true. Employee consent must be obtained.
  4. Transfer of business: if employees transfer to the buyer and perform the same work following a sale of business/assets, the "transfer of business" rules in the Fair Work Act 2009 (Cth) are triggered. As a result, applicable industrial instruments (eg enterprise agreements) and personal/carer's leave entitlements automatically transfer to the buyer. As a buyer, you want to know and understand what those liabilities are going to cost you before completion.
  5. Long service leave: the sale may trigger the deeming provisions in the various State/Territory long service leave legislation, in which case the buyer inherits any transferring employees' long service leave entitlements. This means if you're the buyer, you want an adjustment for the contingent liability in the purchase price.

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