Lodging a claim for Unfair Dismissal will be denied if an employee has not met the requisite continuous service time for the employer. Calculating this period is not straight forward, and will be affected by numerous considerations. If you are an employer, you must familiarise yourself with these considerations. Legal costs defending Unfair Dismissal claims are costly.
Fair Work Act
Under the Fair Work Act 2009 (Cth), an employee is eligible to apply for unfair dismissal if they have been employed for at least the minimum employment period.
Under section 383 this is period is:
- 12 months of continuous service for small business employers; and
- 6 months for other employer types.
The calculation of an employee’s continuous service can include whether the employee has been dismissed or resigned, are being rehired by an associated entity or the role is being transferred as a part of a business sale. Other considerations include entitlements such as annual leave and long service leave, and if there are any related transferable instruments when moving employees over as part of a business sale. Section 22 of the Fair Work Act 2009 (Cth) sets out the period of service.
Important Considerations to determine Continuous Service
Probation periods have no particular impact on the issue of continuous service and assist only in that you do not have to provide a reason to terminate an employee when they are in their probationary period.
When calculating continuous service authorised unpaid leave will not count towards service, for example, parental leave or personal leave. Workers Compensation leave was held to count towards service as it was not avoidable (in WorkPac v Bambach  FWA 670).
Where an employee is dismissed or resign this will be considered a break in their continuous service even if the employee returns to work at another time.
In the case of Ms Tarilee Tebble v Rizmas Pty Ltd  FWA 6853 the employee resigned by way of handwritten note to her employer and then was rehired it was held that she did not meet the minimum requirement for continuous service, and her dismissal application was denied.
Some businesses may decide to create a new business or entity for whatever reason and transfer their employees over to that business. Obviously, it would not be fair to employees if these entitlements were wiped out simply because the employer decided to create a new entity or if they employee starts with the new owner of the business doing the same role.
Therefore for the purposes of the Fair Work Act 2009 (Cth) where an employee is transferred from one associated entity to another it is considered continuous service, or if they end their role and then begin a similar role at the new entity, within a three months period, then continuous service will also continue.
For example in the case of Kefer v Tattersall’s Holdings Pty Ltd  FWA 2375, the employer attempted to argue that the second role that the employee moved to from one associated entity to another did not make-up part of the continuous service of the employee. However the Court held that the companies were associated entities, and the employee began employment with the second employer within three months.
The Court held that the essential elements as;
- (a) the applicant became employed by the second employer (Tattersall’s Holdings aka the employer), not more than three months after the termination of the applicant’s employment with the first employer (Tattsbet); and
- (b) the first and second employers were associated entities when the applicant became employed by the second employer.
The employer also attempted to argue that as the employee had terminated their employment, therefore, the new employment was not part of the continuous service.
However, as the new employment was considered a “transfer of employment” in accordance with the Fair Work Act 2009 (Cth) the service of the previous employment still counted as continuous service.
Under the Fair Work Act where an employee is transferred from one business to another, the employee’s period of service for the original employer may count as service for the new employer.
This is the case where the new employer owns the same business the employee worked for (for example a business asset sale or sale of business), and the employee is hired by the new employer within 3 months of the termination of their employment with the original employer (section 22 of the Fair Work Act 2009 (Cth)).
Even when an employee signs a new employment agreement, their continuous service will start from the date of employment with the original business owner.
Where a new employer does not recognise entitlements or continuous service, the previous employer will usually make sure that all entitlements are met by them. You should ensure that this is addressed in any sale of business agreement before signing.
It is very important that you inform your employees in writing that the period of service with the original employer will not be recognised, if you do not want this previous service to be recognised (section 384 of the Fair Work Act 2009 (Cth)).
If you are concerned about the issue of continuous service and how it applies to your employee you should speak to an employment lawyer and confirm the status of your