Contact: Matthew Payten, Carter Newell (Queensland, Australia)
The industrial laws dealing with the transmission of business can be both significant in their impact and confusing to businesses in their application. The original rationale is sound, being an anti-avoidance mechanism to prevent an employer avoiding an industrial obligation by restructuring legal entities. However, the laws are not limited to movements between associated entities or to a typical circumstance where one company buys the business of another. Instead, following a substantial overhaul of the provisions with the introduction of the Fair Work Act (Cth) 2009 (FW Act), transfer of business provisions may apply in the event of outsourcing, insourcing and, more broadly, where there is an arrangement by which the new employer ‘owns or has the beneficial use of some or all of the assets’ previously owned or used by the prior employer.
If enlivened, the provisions can result in a third party’s collective agreement (CA) or other industrial instruments being deemed to automatically apply to the new business or owner for the transferring employees and, absent an existing CA or award, for new employees going forward. This can lead to employers having to maintain multiple sets of payroll systems, inequities between employees doing the same job, and general confusion. More broadly, if an employee transfers under a transmission of business their period of service is deemed continuous which has ramifications to their entitlements and to unfair dismissal laws.
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