There is a common theme in many of the cases we read now, about getting the process right and following often simple steps, to avoid employee relations issues such as unfair dismissal cases. This applies to many situations, but more so with a transfer of employment situation.
Transfer of business obligations
Buying a business is hard enough, with all of the due diligence obligations a business has to meet. However, it is crucial to make sure the employment aspects are also dealt with, to avoid potential unfair dismissal cases.
This is so because the transfer of employment obligations under the Fair Work Act 2009 may mean that the previous service with the old employer is continuous and therefore counted in relation to whether an employee’s previous service qualifies them to lodge an unfair dismissal claim, being either 6 months, or alternatively 12 months if the employer is classed as a ‘small business’.
Avoiding an unfair dismissal case
When taking over a business, there will be specific requirements and obligations you will have to the employees who have been employed by the previous owners. An interesting case detailed a situation when an employee was terminated by the new business owner, yet they were re-hired as a casual. Eventually, after working shorter hours the employee was dismissed due to alleged unsatisfactory service.
In this case, the new employer did not provide existing employees with a letter stating that their service under the previous employer would not be recognised. Under the Fair Work Act 2009, employers are able to provide the employees with this notice to protect themselves, yet there are a number of other obligations associated with this. Unfortunately for the employer in this case, their failure to do this lead to the courts allowing the unfair dismissal claim to continue.
Lessons to learn
It is important for employers to take note of these type of cases, especially when there is a significant risk associated with it. Here are some lessons to take from this case:
- The new employer in a transfer of employment situation can seek an exclusion under s384(2), potentially removing the employee(s) right to claim unfair dismissal.
- The new employer can achieve this exclusion by writing to the employee prior to the employee commencing work, specifying that the employee’s previous service will not count in relation to an unfair dismissal case.
- The practical effect of this is that it provides the new employer with a new minimum employment period during which the employee cannot claim unfair dismissal.
When purchasing a business, there will be many responsibilities and tasks that you will have to organise, and whilst employment compliance might not be front of mind it should be! ER Strategies are experts in employment compliance and can assist in protecting your business and upholding your obligations to the existing employees. Get in contact with us at 1300 55 66 37, or click the button below.