Whether an old or new employer must pay an employee’s entitlements when a business is sold depends on whether the business has been transferred. This occurs when the timing, duties and connection requirements as set out by Fair Work Australia have been met. These requirements include:

  • The employee must begin working for the new employer within three months of ending their job with the previous employer;
  • Their duties must be the same or nearly the same as they were with the previous employer; and
  • There must be a connection between the previous and new employers which can be established with the sale of business assets, association between the entities or outsourcing.

If these requirements have been met, there will be a transfer of business and the new employer must recognise the time an employee has worked for their old employer when working out some of their entitlements. These include:

  • Sick and Carer’s leave;
  • Requests for Flexible Working Arrangements; and
  • Parental Leave.

However, there are also a number of entitlements that a new employer does not have to recognise. These include:

Redundancy

The new employer can choose not to recognise an employee’s service with the old employer when determining their redundancy entitlements as long as the new employer is not an associated entity of the old employer. This means the old employer will need to pay out the employee’s redundancy entitlements upon termination.

The employee will not be entitled to redundancy pay if they reject the new employer’s job offer where:

  • The terms and conditions are similar to those of the old job;
  • The employee’s service with the old employer has been recognises for their redundancy pay; and
  • There would have been a transfer of employment had the employee accepted the job.

Annual Leave

The decision for a new employer to honour annual leave entitlements also depends on whether the employers are an associated entity. For example:

  • Where the employers are associated entities, the new employer may decide to have the annual leave carried over from the old employer; or
  • Where the employers are not associated entities, the new employer may decide that the annual leave will not be carried over and the old employer must pay the accumulation of annual leave remaining.

Long Service Leave

The new employer usually needs to recognise an employee’s service with their old employer when calculating long service leave except where:

  • The employee was not entitled to long service leave under a Registered Agreement as at 31 December 2009;
  • An Agreement was made on or after 1 January 2010 that replaced the former Agreement; and
  • The new Agreement states that service under an old Agreement does not count toward long service leave.

Unfair Dismissal

The new employer generally needs to recognise an employee’s service with their old employer for the purposes of Unfair Dismissal except when:

  • The employee is a transferring employee;
  • The businesses are not associated entities; and
  • The new employer informs the employee in writing before their employment begins that their service with the old employer will not be recognised.

Notice of Termination

The employee’s position with their old employer ends when a business is transferred. This means the old employer must either give notice of termination or provide payment in lieu of notice. The old employer is also required to pay the notice period if the transfer of the business occurs before the notice period ends.

Key Takeaways

Employee’s entitlements will depend on whether the business has been transferred. However, there are number of entitlements that a new employer does not have to recognise including long service leave and annual leave.

Do you need assistance with transferring or terminating employees after buying or selling a business or help with working on their entitlements? Get in touch with our Employment Lawyers by filling out the form on this page or calling 1300 544 755.

Rachel Amiri

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