Employment and Transfer of Business

Where there is a transfer of business, the transferring employees will be covered by the old employer’s enterprise agreements or a named employer award (ie a modern award that is expressed to cover one or more named employers). The old employer’s enterprise agreements or named employer awards apply even if the new employer is already covered by an enterprise agreement or award.

Where a transferring employee had an individual flexibility arrangement with the employer that had effect as if it were a term of the agreement or award, that individual flexibility arrangement also continues to apply on the transfer of business.

After the transfer of business has taken place, new employees of the employer who are directed to perform work that was previously performed by the employees of the old employer will also be covered by the old employer’s enterprise agreements if the new employer has no enterprise agreement or named award capable of applying to those employees.

Fair Work Australia will have a role in determining the application of enterprise agreements and named employer awards where there is a transfer of business.

A transferring employee, unions covered by enterprise agreements, unions entitled to represent the interest of employees covered by an award or the new employer may apply to Fair Work Australia to order that the old employer’s agreement or award not cover the new employer and the transferring employees.

In deciding whether or not to make such an order, Fair Work Australia will take into account a range of factors including:

• The views of the employer and affected employees, and any disadvantage that may be suffered by them;
• Whether the relevant enterprise agreements have reached their nominal expiry dates;
• Whether the old employer’s agreement or award 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 old employer’s agreement or award covering the new employer;
• The degree of business synergy between the old employer’s agreement or award and any workplace instrument that already covers the new employer; and
• Public interest.  

Similarly, applications may be made by employees if the new employer does not recognise that enterprise agreements have transferred.

Fair Work Australia may also make an order varying enterprise agreements to:

• Remove terms that are not capable of meaningful operation because of the transfer of business (for example participation in the old employer’s share or product discount plan);
• Remove ambiguity or uncertainty about how a term of the agreement operates; and
• Enable the agreement to operate in a way that is better aligned to the working arrangements of the new employer’s business. For example, Fair Wok Australia may consider it appropriate for transferring employees to keep their entitlements to pay and allowances but modify the hours of work in an agreement so that the transferring employees can be better integrated into the new employer’s business.

The transfer of business rules in the FW Act only apply to transfers of business that occur on or after 1 July 2009.

The transmission of business rules in the Workplace Relations Act 1996 continue to apply where the transmission of business occurred before 1 July 2009. Where a transmission of business occurs before 1 July 2009:

What should employers do?

• A 12 month transmission period applies to the old employer’s instrument;
• The rules governing the transfer of entitlements under the Australian Fair Pay and Conditions Standard are preserved; and
• Applications to the Australian Industrial Relations Commission for an order modifying the operation of the transferred instrument are preserved, provided that the application is made within 90 days of 1 July 2009.

The transfer of business provisions also cover employers and employees covered by transitional instruments made before 1 July 2009 (for example, Individual Transitional Employment Agreements (ITEAs)).