Reading time: 3 minutes

Are you ready to buy your very own franchise business and deciding whom to employ? Initially, this can be a daunting experience, particularly when your knowledge of employment law is limited. This article will examine the legal considerations of employing staff when you run a franchise business.

Finding and employing staff

When you buy an existing franchise business, you will likely have the opportunity to employ some of the employees from the previous franchisee. Those employees that are given new employment contracts by you as the purchaser are known as ‘transferring employees’.

Rather than hiring every employee on the presumption that they are all valuable to the business, give each employee the opportunity to prove their worth in an interview and make an assessment as to which employees would best serve the interests of the business based on their skill set. When deciding whom to employ, make sure your decision not to employ someone is not based on any discriminatory basis, such as gender, pregnancy, age, sexuality, religion or marital status, as this is against the law.

Transferring employees must be given their due entitlements from their previous employer as part of the transfer. Generally, this will be characterised as an adjustment at the time of settlement of the sale of the business, i.e. if you are taking on the long service leave obligation of a particular employee, an adjustment for the relevant amount will be made in your favour at settlement (i.e. a deduction to the purchase price payable).

Practical Example

Employees in Victoria, after working for seven years continuously in the same role, receive pro-rata long service leave entitlements. So if you take on an employee from the vendor as part of the purchase, and that employee has been working for six years with the employer, you will be liable to pay the long service entitlements at the seven-year mark. In addition, employees being transferred to your new business are fully entitled to take whatever paid personal leave they have accrued over time when they start working for you.

Again, you are entitled as the purchaser to negotiate an appropriate adjustment to the purchase price on this basis.

Another thing to keep in mind when deciding when to employ someone from the business you buy is that any enterprise agreement or modern award that applied previously to the employees will also apply under the new employment arrangement. The same goes for any industrial instrument that previously applied to the transferring employees.

For this reason, it is worth seeking legal advice when deciding whom to employ in your new business. There are certain aspects of their employment history that will be important to know and understand, such as service periods and entitlements.

In the event that you decide to give a job to a previous employee, you’d be wise to (either personally or from your lawyer) send a confirmation letter that details exactly what you intend to recognise from the previous employment, as well as what you won’t recognise. This might include things like:

  • Redundancy payment;
  • Leave entitlements, such as annual leave;
  • Eligibility of parental leave (unpaid);
  • Flexible working arrangements; and
  • Eligibility to remedies of unfair dismissal.

Conclusion

Part two on “Employment considerations when entering a franchise” will look further into the different legal and non-legal issues both during and after employment. If you need an employment lawyer to advise you on your rights and obligations towards your staff, contact LegalVision on 1300 544 755 and get a free fixed-fee quote today.

Webinars

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
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards