Buying, selling or taking over a business is a stressful time. There are lease and operation contracts, bramding agreements,  suppliers to organise and a myriad of details to arrange.  As we have explored before there are also implications for staff when a business transfers. This wee’ks HR Highlight will explore the nature of Transfer of Business

Transfer of Business

It is very common for the arrangements at a site to change, and for the parties to consider that there is a change in management, not a transfer of business.  However the Fair Work Act applies a very specific test to establish whether, for the purposes of the employees involved, there has been a Transfer of Business, and all parties must understand this detailed area.  Failure to appropriately handle any transfers could result in serious penalties.

The test of whether a business is transferring under the Fair Work Act is

Under section 311(1) of the Fair Work Act, a Transfer of Business occurs from one entity (the old employer) to another entity (the new employer) when;
a)   The employment of an employee of the old employer is terminated (this can be for any reason including resignation)
b)   The employee joins the new employer within three months of the termination from the old employer
c)   The work the employee performs for the new employer is the same, or substantially the same as the work they performed for the old employer
d)   There is a connection between the old employer and the new employer


A connection between the old employer and the new employer exists in a number of situations, including when there is an arrangement between the old employer and the new employer, such as when the new employer owns or has beneficial use of some of the old employers (tangible or intangible) assets.

Continuity of Service

Also relevant is section 384(2)(b), which provides that, unless the new employer expressly states otherwise before a transferring employees starts work with the new employer, the employee’s service with the old employer must be recognised for the purposes of determining whether that employee has completed the minimum employment period required before the employee is eligible to bring an unfair dismissal claim.

Recent Case

A recent case has clarified the operational definitions of connected and arrangement. Where the commencement of a new business managing a hotel was not seen to have had an arrangement with the old business managing the hotel, rather it was found that the arrangement was with the hotel owner. Click here for more on this case.

Getting it right

Either way it is important that communication with the staff currently working at the site is clear.

As with the engagement of all new staff you will need to ensure that you communicate;

  • The position that they are being offered
  • The business that will employ them
  • The primary location that they will be engaged at
  • The capacity they are being employed under (permanent, part time, casual)
  • The employment instrument they will be engaged under (the Award)
  • The terms and conditions of their employment and any probationary periods that are to apply
  • The person to contact if they require information or assistance
  • Any key business policies
  • The employees rights under the Fair Work Act and the National Employment Standards (through the Fair Work Information Statement)

In many cases there is likely to be some staff that were existing staff at the site under the old owner.  As the new owner of operator it is important that you also explicitly state that the employment start date is [x] and that while the business recognises that the staff member has worked at the employment location before that it does not recognise the time with the old employer as time served with itself for the purposes of any rights or obligations under the Fair Work Act.

It is important that it be formalised in the form of a Letter of Offer. For more on Letters of Offer and their contents see the HR Highlight on Letters of Offer

Here to Help

ACAPMA members are reminded that ACAPMAlliance has a series of resources from Quick Reference Guides to template letters and investigation and reporting checklists that can assist with ensuring compliant and consistent responses in this area, and can call on the advice and support of the ACAPMAlliance Workplace Relations Professionals on 1300 160 270.

HR Highlights are things to consider, implement and watch out for in your business.

They are provided as general advice and you should seek further advice on your situation by  calling 1300 160 270 and speaking to one of ACAPMA Workplace Relations Professionals it’s free for members.
ACAPMA Membership is affordable at only $770 per year for a single site and valuable with sites gaining HR advice support and representation as well as a raft of other benefits and discounts.  Click here to learn more about ACAPMA Membership.