Reading time: 3 minutes

If you are buying a business, it’s important to consider what impact this transfer will have on current employees. The Fair Work Act 2009 (Cth) determines the obligations and responsibilities the seller or buyer has for current employees.

A buyer who decides to transfer employees from the existing business to the new business needs to provide notice to the employees it wishes to transfer. The employees are usually given set time periods to respond to this notice.

Once the existing employees have agreed to be transferred to the new business, a clear list of the employee entitlements including, but not limited to, any personal and annual leave, should be set out in the sale of business contract.

Redundancy

If an employee rejects the new employer’s job offer, they will not be eligible for redundancy entitlements from the old employer. However, if this were the case, the old employer would need to be able to show that:

  • the new job would have similar terms and conditions to the old job; and
  • there would have been a transfer of employment if the employee had taken the job.

Annual Leave

If the new employer is not an associated entity of the old employer, they are not obliged to take into regard an employee’s accumulated annual leave. However, the new employer can decide whether they want to carry across an employee’s accumulated annual leave. If this does not happen, the old employer is responsible for paying out any accumulated annual leave. Generally, this is done in the form of an adjustment to the purchase price at the time of settlement.

Notice of Termination

Employees that are not being transferred to the new business will either be made redundant or terminated in accordance with their employment agreement.

To avoid disputes in the future, it is important that all non-transferring employees have their employment contracts terminated correctly, and all entitlements are paid out.

Conclusion

These are just some of the considerations a buyer, “the new employer”, needs to consider if they want to hire a current employee of the business. The transfer of an employee can, of course, be much more complex. For example, when a buyer wants to continue hiring an employee but wants to place them in another position with a lower salary. If you do decide to hire existing employees as part of your business purchase, it would be important to seek the advice of an experienced employment lawyer to ensure you are complying with the law.

Webinars

New Kid on the Blockchain: Understanding the Proposed Laws for Crypto, NFT and Blockchain Projects

Wednesday 25 May | 10:00 - 10:45am

Online
If you operate in the crypto space, ensure you understand the Federal Government’s proposed licensing and regulation changes. Register today for our free webinar.
Register Now

How to Expand Your Business Into a Franchise

Thursday 26 May | 11:00 - 11:45am

Online
Drive rapid growth in your business by turning it into a franchise. To learn how, join our free webinar. Register today.
Register Now

Day in Court: What Happens When Your Business Goes to Court

Thursday 2 June | 11:00 - 11:45am

Online
If your business is going to court, then you need to understand the process. Our free webinar will explain.
Register Now

How to Manage a Construction Dispute

Thursday 9 June | 11:00 - 11:45am

Online
Protect your construction firm from disputes. To understand how, join our free webinar.
Register Now

Startup Financing: Venture Debt 101

Thursday 23 June | 11:00 - 11:45am

Online
Learn how venture debt can help take your startup to the next level. Register for our free webinar today.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2019 Most Innovative Firm - Australasian Lawyer