Transfer of Business

One of the most substantial changes under the Fair Work Act is changes to the old transmission of business provisions previously contained in the WRA. Gone is the concept of a “transmission of business”, instead replaced with a new concept of “transfer of business”. With this change comes a change in focus from the transmission of the business itself to the transmission of the employees’ entitlements.

WHEN DOES A TRANSMISSION OCCUR?

From 1 July 2009 a transmission of business occurs when:

  • there is a transfer of business from an employer (the old employer) to another employer (the new employer); and
  • this requires the termination of employment with the old employer (including resignation) and, within 3 months, employment by the new employer; and
  • the work the employee performs is the same or substantially the same.

The circumstances of transmission have been expanded to also include situations where transmissions occur between “connected” companies. The connection between an old and a new employer exists when;

  • there has been an arrangement such that the new employer has the beneficial use of tangible or intangible assets;
  • that the old employer has beneficial use of and those assets relate to the transfer in work.

In this case the focus is on the transfer of the work performed by the employee and the subsequent transfer of employee entitlements. In short, the new arrangements expand the circumstances under which employee entitlements contained in awards and/or agreements will follow employees to include;

  • simple sale of the business to a new employer, with a transfer of assets; or
  • transfer of employees from one associated entity to another, without a transfer of assets; or
  • work that is outsourced to a new employer, with or without a transfer of assets; or
  • previously outsourced work which is “in-sourced” back to the original employer.

 WHAT INDUSTRIAL INSTRUMENTS/CONDITIONS TRANSFER?

Any industrial instruments which had applied to the employees prior to the transfer will continue to apply to the employees as well as any modern awards that expressly cover one or more named employers.

 The transferring instruments apply to the transferring employees and possibly to employees of the new employer who are later employed to perform the same or substantially similar work as the transferring employees. More importantly, if an employer has an enterprise agreement in place that covers their existing employees, this will not override the transferring instrument in respect to the transferring employees – it may be possible to have 2 instruments with varying paying conditions covering employees doing the same work.

THE ROLE OF FWA

FWA has a role in determining the application of industrial instruments that are to apply to transferring and non transferring employees. FWA can make orders that:

  • the transferring award or agreement does not cover the new employer and the transferring employees; or
  • the existing agreement or award covering the new employer will cover the transferring employees;
  • an instrument does or does not cover non-transferring employees (new or existing) performing the same work;
  • vary enterprise agreements to better align the agreement to the working arrangements of the new employer (such as altering span of hours, for example).

Employers and unions can seek orders from FWA in relation to the above.

Before making an order, FWA must consider the following:

  • the views of the new employer, or a person who is likely to be the new employer, and the employees who would be affected by the order;
  • whether any employees would be disadvantaged by the order in relation to their terms and conditions of employment;
  • whether the relevant enterprise agreement has reached its nominal expiry date;
  • whether the transferable instrument would have a negative impact on the productivity of the new employer’s workplace;
  • whether the new employer would incur significant economic disadvantage as a result of the transferable instrument covering the new employer;
  • the degree of business synergy between the transferable instrument and any workplace instrument that already covers the new employer; and
  • the public interest.

 WHAT DOES ALL THIS MEAN?

With the changes bought by the FWA, entitlements will move with employees under a wider range of circumstances. In any situation where employees are moved or transferred either internally or externally, human resources staff should be aware of the right of employees to have their entitlements moved with them. If there is any dispute on the entitlements then the matter should automatically be referred to FWA for determination and the making or orders.