Notice Periods & Offers of Employment – some basic “employee” considerations in a Business Sale Contract
No employee is an asset
It is common law principle that employees cannot be transferred from one employer to another without their consent, as “no employee is an asset in the employer’s balance sheet to be bought or sold” (Minster for Employment v Gribbles Radiology (2005) at [43])
Existing agreement at an end – Notice Periods
This means that if you are an owner of a business and selling or transferring your business to another entity, the existing employee contracts will need to come to an end.
The Fair Work Act (Cth) sets out the minimum notice of termination requirements.
You also need to check any:
- Enterprise agreement
- Employment contract
- Modern Award
as different notice periods may apply to different employees.
So, why is the notice period important?
Because where a seller fails to provide the minimum notice of termination, the seller will be liable to provide payment in lieu.
Offer of employment by Buyer
The Fair Work Act (Cth) prescribes that transferring employees must be offered work on “no less favourable terms” by the purchasing employer otherwise the seller may be required to pay the employee redundancy pay.
If any employee is not required to transfer or is offered employment that is, on an overall basis, suitably comparable or in some way is less favourable, the employee will be entitled to redundancy pay.
As this liability will usually rest with the seller, as part of the negotiations for any transfer of a business, the seller may need to ensure that the employees are offered comparable employment and should conduct a comparative exercise to determine whether the proposed terms and conditions of the transferring employees are no less favourable than they were with the seller to avoid redundancy pay liability.
Note – redundancy pay is on top of payment in lieu of notice.
Contact
If you are looking to sell or transfer your business, please contact MobbsMarr Legal on 07 4417 4417 or email us on georgina@mobbsmarr.com.au or riley@mobbsmarr.com.au