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.


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.

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