State of Western Australia
In the State system where a business is sold and the buyer takes on the existing employees of the old employer this is referred to as ‘transmission of business’.
As soon as practicable, employers – both sellers and buyers – are required to inform employees of the situation and how this is likely to affect them, particularly with regard to recognition of prior service, Long Service Leave and other paid leave entitlements and whether a new employer intends to employ staff of the old employer.
Otherwise known as ‘severance payments’ in general terms State employers with less than 15 staff are not obliged to make additional payments to staff however, some State Awards have very specific requirements with regard to the making of additional redundancy (severance) payments, so employers need to check their applicable instruments to be certain of their legal obligations.
Severance payments are calculated on years of continuous service with a business and can be up to a maximum of 16 weeks payment so employers need to be very aware of the underlying costs of redundancy when selling their business.
Dependent on conditions within the Contract of Sale documents the old employer may still be obligated to make severance (redundancy) payments to the transmitting employee even where their employment will continue with the new employer.
Notice of Termination
Whether or not the new employer is taking on the employment of existing employees the ‘seller’ must still formally terminate their employees’ employment by giving due and proper ‘Notice of Termination’. The State and Federal systems are the same in this respect and dependent on service an employer may have to provide up to 5 weeks notice or payment in lieu of notice to employees.
In the State system the seller has an obligation to notify Centrelink of any redundancies occurring as a result of the buyer not employing employees regardless of the number of employees being made redundant. Where a buyer does employ employees but 15 or more employees are to be made redundant as a part of the process then the seller is also obligated to notify Centrelink.
Accrued annual leave should be paid out by the seller prior to the transmission date – service starts again with the new employer from the date of transmission of the business. In general terms in the State system where annual leave is cashed out leave loading is not paid.
Just about all State awards have a requirement to pay leave loading – check your Award(s) in relation to this requirement.
Whilst sick leave is not paid out on termination of employment the management of sick leave during a transmission of business is dealt with in most State Awards which contain specific reference as to how this works and is closely associated with the requirements relating to Long Service leave accruals.
This extract from Clause 27 (relating to the sick leave provisions) of the ‘Shop and Warehouse Award’ illustrates the above point as follows:
Where a business has been transmitted from one employer to another and the worker’s service has been deemed continuous in accordance with subclause (3) of clause 2 of the Long Service Leave provisions published in volume 59 of the Western Australian Industrial Gazette at pages 1-6, the paid sick leave standing to the credit of the worker at the date of transmission from service with the transmittor shall stand to the credit of the worker at the commencement of service with the transmittee and may be claimed in accordance with the provisions of this clause.
Long Service Leave
Employment service with the old employer carries over to the new employer; the seller may have to ‘compensate’ the buyer for any likely monetary obligations, particularly where a pro rata entitlement to LSL is close to maturing (ie upon the completion of 7 years continuous service).
Employment service with the old employer carries over to the new employer and counts as service with the new employer for the purposes of Parental Leave.
The buyer of a business is not obligated to take on the employees of the seller. If the buyer does not employ the seller’s employees then the buyer has no obligation to them. Where the buyer does take on the employees of the seller then they are obliged to recognise prior service for the purposes of LSL and Parental Leave. The buyer will need to make employment offers to the seller’s employees in writing of their terms and conditions of employment. The buyer should request information from the seller about any relevant Awards, agreements or Contracts of Employment so as to understand the obligations they are taking on as the new employer.
Need further advice and assistance? Call us during office hours for support.