Legal Update: New laws governing a Transfer of Business

The Australian government’s reform of the Australian industrial relations system has seen a change to the rules governing a transfer of business.

What’s Changed

• Under Work Choices a transmission of business required:

At least one employee of the vendor accepted employment with the purchaser within two months of the sale of the business.

If this occurred the transferring employee’s previous industrial instrument would to transfer to the new employer. The industrial instrument would however only apply for a maximum period of 12 months.

Now, under the Fair Work regime, a transfer of business will occur where a two step test is satisfied. Where within three months an employee of the vendor accepted employment with the purchaser and:

The work the employee performs for their new employer is ‘transferring work’; and

There is a “connection” between the old employer and the new employer.

A transfer of business will have occurred. Accordingly, the employee’s previous industrial instrument transfers with the employee to the new business. Unlike Work Choices, the industrial instrument will remain in effect until replaced.

Don’t Get Caught

The second limb of the new test could have unexpected implications for Australian employers. Employers are already been caught out by the new transfer of business rules, as a transfer of business will occur in the following situations:

• A Sales of businesses;
• The merger and de-merger of private companies;
• The sales and asset acquisitions;
• Corporate restructures and consolidations;
• Outsourcing, and
• In sourcing.

For more information about how this may affect your business please contact Hemming and Hart Lawyers.