Section 311 of the Fair Work Act 2009 (‘FWA’) sets out some of the circumstances in which a ‘transfer of business’ can occur, and with it, a transfer of liability in respect of employee entitlements (including redundancy entitlements) from the old employer to the new employer.

These factors are important to be aware of if you are contemplating purchasing a business because you can become liable for a significant amount of outstanding employee entitlements which can end up costing you hundreds or thousands of dollars.

Likewise, if you are the present owner of a business, it is a good idea to be aware of your employee entitlements prior to the sale/transfer of the business, to ensure that these are properly transferred to the new owner of your business to avoid future liability.

Some of the factors set out in s311 of the FWA which, if satisfied, means a ‘transfer of business’ has occurred include:

  • the employment of an employee of the old employer has terminated;
  • within 3 months after the termination, the employee becomes employed by the new employer;
  • the work (the transferring work ) the employee performs for the new employer is the same, or substantially the same, as the work the employee performed for the old employer;
  • there is a connection between the old employer and the new employer (including an arrangement between the old employer and the new employer as to the use of the old employers assets; or; the work is outsourced to the new employer; or the employers are associated entities within the meaning of s50AAA of the Corporations Act 2001 (Cth)

Where it is found that a transfer of business has occurred, then it is also possible that certain workplace instruments which covered employees, termed ‘transferable instruments’, will carry over to the new employer and the new employer will be bound by them.  These can include particular agreements, awards, employer awards, individual flexibility arrangements, guarantees of annual earnings and preserved redundancy provisions.

There are certain notification requirements which employers must abide by in respect of their employees, as well as requirements in respect of employee records (for both old and new employers).

It is always prudent to obtain experienced and professional legal advice from a lawyer who has experience in this particular area of law to ensure that you are fully apprised of the situation before you sell or purchase a business.

Please contact our office on 07 5563 8970 today to arrange a consultation with one of our friendly Gold Coast Lawyers.