Chapter 9 - Transfer of business
9.1
Chapter 2, Part 2-8 establishes new transfer of business provisions to
ensure agreements cannot be evaded and that transferring employees are not
disadvantaged. WorkChoices provided that instruments transferred only in the event
that employees were taken on by the new employer and instruments only
transferred for 12 months. After that employees reverted to whatever applied in
the workplace.[1]
9.2
The WRA does not define 'transmission of business'. This resulted in a
number of tests being developed by the courts to determine whether a
transmission has occurred.[2]
Nor did the WRA adequately protect the conditions and entitlements of employees
resulting from corporate restructuring.
Proposed changes
9.3
To remedy this, clause 311 of the bill introduces a specific test for
transfer of business which occurs when:
- the
employment of an employee of the old employer is terminated;
- former
employees are retained by the new employer within three months;
- the
work performed is the same, or substantially the same; and
- there
is a connection between the old and new employer.[3]
9.4
Thus, the bill broadens the circumstances in which a transfer of
business occurs and defines the focus of the work being performed rather than
the character of the business.[4]
It retains the provision that instruments transfer only in the event that
employees transfer. There is no 12 month limitation. Instruments move
permanently unless and until the employees and employer decide to make a new
bargain.[5]
9.5
The creation of modern awards means that the transfer of awards will be
less relevant in the future and the main issues is whether enterprise
agreements will transfer.[6]
9.6
Part 2-8, Division 3 provides that FWA has a role in determining the
application of agreements of the new employer to transferring employees, and
transferred instruments to non-transferring employees. The department described
these powers as ‘remedial orders’ where, subject to a number of criteria such
as views of the employees and employer, questions of disadvantage and public
interest, FWA has the ability to change the default rule.[7]
9.7
While welcoming the intention of the transfer of business provisions,
the ACTU noted that a transfer of business only occurs if an employee goes to
work for the new employer within three months. It argued that this allowed new
employers to avoid the provisions by withholding offers of employment for three
months or more and advocated that this period be extended.[8]
9.8
Employer groups were concerned about the new definition of a transfer of
business and argued it may force incoming employers to take on existing
enterprise agreements and to continue to run operations in ways which have not
been efficient, and this may affect whether transferring employees are taken
on.[9]
9.9
DEEWR responded to concerns raised by employer groups by stating:
...there is no greater disincentive as a result of the provisions
of this bill for a purchaser of a business to bring across the employees than
there is under the existing framework. In essence, that incentive remains the
same as it is at the moment. It ultimately is a business decision in terms of
the skill set of the employees and a whole range of factors that the business
will take into account. In those terms, we do not see any significant change in
this bill.[10]
Minimum employment period
9.10
The TCFUA objected to clause 384(b) (iii) which may allow an employer to
require an employee to serve another minimum employment period to access unfair
dismissal when they may have already worked for the old employer for decades.
It argued that this provision will:
...only encourage sham transferring arrangements, which are in
fact, already a feature of the TCF industry. It is not uncommon, for example,
for a business to close one day and re-open the next under a different name but
operating out of the same premises, with the same directors and performing the
same work[11]
9.11
DEEWR officials explained that in relation to the NES, the employer will
have a choice to recognise service in relation to annual leave and redundancy
pay. If the new employer does not agree to recognise service, these
entitlements must be paid out. There will also be a choice in relation to the
minimum employment period for unfair dismissal protection. Previous service
will be recognised unless the employer informs transferring employees in
writing of a requirement for a new minimum employment period.[12]
Entitlements
9.12
The ACTU pointed out that the bill appears to allow a new employer to
offer employment to a transferring employee on terms that they lose their
accrued leave entitlements. It added that if the employee refuses this offer,
it appears they will not be entitled to a severance payment from the old
employer.[13]
9.13
DEEWR explained that the provisions deal with different entitlements in
different ways, reflecting the current approach to termination change and
redundancy clauses in awards as developed by the AIRC. For example with annual
leave there are two options where the transaction occurs:
...The options are that the old employer pays everyone out with
their annual leave or the new employer makes a decision to take on the accrued
entitlements of any transferring employees.[14]
9.14
For other entitlements where this is not such a choice, the department
reassured the committee that the entitlement moves over.[15]
9.15
The committee was concerned to hear the following example from the
Australian Nursing Federation (ANF):
Our experience in Victoria, certainly in late 2007, after the
introduction of the legislation, and in early 2008, is that there were some six
facilities where nurses who had been long-term employees of the facility, which
was then purchased by another private aged-care employer, were dismissed during
the probationary period. Despite the fact that their employer had received
funds from the previous owner to cover the entitlements, those nurses were
excluded under the probationary period. We attempted to fight that in the
Australian Industrial Relations Commission. We got a favourable decision, which
was then unfortunately overturned by a full bench. We are very keen on that
provision being amended in the Fair Work Bill.[16]
9.16
This example was raised with the department because it intersected with
the NES and unfair dismissal provisions (see chapter 5). The department advised
that terminating employment unfairly to avoid LSL provisions would be a breach
of the general protections.[17]
In response to a Question on Notice[18]
concerning the ANF example set out above, the Department advised:
Under the Fair Work Bill a transferring
employees’ previous service for the purposes of the minimum employment period
for unfair dismissal will be recognised unless the new employer expressly
informs transferring employees, in writing, of a requirement for a new minimum
employment period. This is in contrast to the existing position, where the
Australian Industrial Relations Commission has held that a new qualifying
period applies unless it is expressly waived.
If the new employer is an associated entity of
the previous employer, the employee’s service with the previous employer will
be taken to be continuous for the purposes of the unfair dismissal minimum
employment period.
These provisions were established to reflect a
balance between protecting employees who have already served a minimum
employment period for unfair dismissal and the needs of the new employer.
In relation to the specific question about long
service leave, the General Protections provisions in the Bill provide that an
employee cannot be dismissed in order to prevent the employee from exercising a
workplace right. A workplace right includes a benefit (for example long
service leave) under a workplace law or workplace instrument.
9.17
The committee majority is concerned that this protection will not be
adequate against employers evading their responsibilities in a situation such
as the one described by the ANF.
Recommendation 10
9.18
The committee majority recommends that a probationary period after a
transfer of business should not be required to recommence and they should be
treated as existing employees.
Transfer of instruments
9.19
Employers were concerned about the requirement to take on the full
‘contractual’ obligations (that is, their obligations under an enterprise
agreement) of a business which has been taken over.[19]
There are significant disincentives to purchasing businesses if they are not
doing well financially.
9.20
In response to these concerns, DEEWR explained that although a business
will come with contractual obligations, under Division 3, Part 2-8 , FWA will
have the capacity to rationalise the instruments of employment that apply and
such a request may be considered before or after the transfer.[20]
9.21
Employers were also concerned about whether they will be obliged to take
on the employees of the business. DEEWR explained that the bill does not impose
an obligation on a new employer to employ the employees of the old employer.[21]
9.22
The CPSU supported the new provisions and stated:
...the issue is about balancing the legitimate interests of the
business and those employees to have their conditions protected and that that
is the question for the legislation. We think that the provisions that are
proposed in the bill do that fairly.[22]
Conclusion
9.23
The bill contains anti-avoidance provisions. It provides a simple test
for when a transfer of business occurs to ensure agreements cannot be evaded
and that transferring employees are not disadvantaged. The committee has heard
of many employees disadvantaged in this way. The bill includes protections for
a transferred employee's accrued NES entitlements. The bill also provides for
greater flexibility and certainty for employers and employees in dealing with
transfer situations. FWA will be able to determine the application of
agreements and named employer awards of the new employer to transferring
employees and transferred instruments to non-transferring employees, including
prior to the business transfer occurring.
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