Business sales and employee entitlements – What happens?

Monday, Aug 26, 2019

Employee entitlements are commonly overlooked when a business is being sold. Generally, where there is a transfer of employment due to a business sale, service with the old employer counts as service with the new employer. Service is what primarily determines an employee’s entitlements.

However, a new employer can decide not to recognise a transferring employee’s service and National Employment Standards entitlements, such as personal or annual leave. Where this occurs, the old employer will likely need to treat it as a redundancy.

The catch is that this option is only available when the old employer and the new employer are not associated entities and, before the new employment starts, the new employer informs the employee in writing that their service with the old employer will not be recognised.

A recent unfair dismissal case in the Fair Work Commission (FWC) highlights the need for employers to understand their options and obligations.

In this case the employee had only been employed with the new employer for 21 days, but as the employee was not notified in writing that there service would not be recognised, FWC counted their four and a half years of service with the old employer. This meant that the employee had served well in excess of the mandatory minimum employment period threshold and FWC accepted to hear their unfair dismissal claim.

It is important to note that as South Australian long service leave is covered by separate state-based legislation. An employee’s service and entitlements automatically transfers and must be legally recognised if the employee is employed by the new employer.

If you have any questions contact Adrian Richards on (08) 8222 9212 or