Transfer of business

Context

Under Part 2 – 8 of the Fair Work Act 2009, in situations in which there has been a transfer of business, certain workplace instruments (transferable instruments) that covered employees of the old employer continue to cover those employees (employed by the new employer).

Each of the following is a transferable instrument:

  • an agreement (an enterprise agreement approved by FWA, a collective agreement, a preserved individual or collective state agreement, an Australian Workplace Agreement, an Individual Transitional Employment Agreement, a certified agreement made before 27 March 2006 and an old industrial relations agreemeworkplace determination
  • an award
  • notional agreement preserving a state award (NAPSA)
  • named employer award (a modern award that commenced on 1 January 2010 that expressly covers one or more named employers)
  • preserved redundancy provisions (in certain circumstances, if the transfer occurred before 31 December 2009)
  • individual flexibility arrangements
  • guarantee of annual earnings.


Position

Having to pay employees based on a range of different agreements is overly restrictive and a trap for some employers that are not aware of the requirement.

The costs of such agreements often make a sale unviable, and place a restriction on the normal sale of a business that is inappropriate and unnecessary. The requirement to seek orders from the Fair Work Comission (FWC) that such instruments will not transfer is impracticable for some businesses, due to the exposure of the business to union intervention. 

These provisions are inconsistent with the objectives of the Act and fail to meet the objectives of Part 2 – 8, which are set out in section 309. These objectives are to provide a balance between the protection of employees’ terms and conditions of employment and the interests of employers in running their enterprises efficiently.

As they currently stand, this Part does not allow employers to run their businesses efficiently. The acquisition of a business can become very complicated, with a number of awards and enterprise agreements applying to different parts of the business. It also makes it very difficult for a business that wishes to buy another business to add to an already existing business. In these circumstances, there can be two or more different enterprise agreements applying to employees who do the same type of work.

It would be preferable to start with a clean slate, with terms and conditions to be derived from the NES, modern awards, and in time, a new enterprise agreement, should they wish to negotiate one.

In relation to high‐income earners, this protection is not needed and only leads to such employees not being offered employment in the new business. If the employee is of crucial importance to a business, they can negotiate appropriate outcomes for themselves in any event.


Recommendations

  • Part 2 – 8 of the Fair Work Act 2009 should be deleted. Alternatively, the transfer of business provisions should be simplified so that employers can understand their obligations.

18 June 2015