LexisNexis Practical Guidance®

Part 2-8 of the Fair Work Act 2009 (Cth) (FW Act) contains a framework for determining terms and conditions of employment when there is a transfer of business between one national system employer and another.

The term ‘transfer of business’ is defined broadly in the FW Act to apply not only to the sale and purchase of a business, but also certain outsourcing and insourcing arrangements, and transfers within corporate groups. The focus of the provisions is on the transfer of work (rather than transfer of business per se), and whether there is a relevant connection between the two employers.

For more information, see When does a transfer of business occur?

In a transfer of business scenario, certain workplace instruments (“transferable instruments”) that covered the original employer will follow the transfer and cover any transferring employees who are engaged by the new employer. In limited circumstances, a transferable instrument can also cover “non-transferring employees” of the new employer.

For more information, see Which instruments can be transferred?

The general rule is that a transferring employee’s service with the old employer will be preserved, however the new employer can choose not to recognise service for the purposes of certain entitlements. This means that the old employer must pay out the accrued entitlement on termination.

A new employer will generally seek compensation from the old employer for assuming liability (voluntarily or otherwise) in respect of any entitlements of the transferring employees.

For more information, see How do you deal with employee entitlements?

General contract law principles mean that an employee cannot be unilaterally transferred from one employer to another. The employee must accept an offer of employment from the new employer. Even where an employee effectively transfers from one entity to another in an apparently seamless way (ie where the employee in fact continues to perform the same role, in the same place, and with the same assets, but for a new entity), in legal terms this will constitute a termination of one employment contract and the commencement of a new contract with the new employer. In other words, a transfer of employment must be implemented through the termination of one contract (including via resignation by the employee) and a new offer of employment.

For more information, see What is the effect on employment contracts?