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  1. #1

    Default Sale of Business - staff entitlements

    recently our employer advised that there was an offer on the business and gave us all termination letters saying that the new owners would be giving new employment contracts and all our entitlements would be carried over.
    I have since received a few queries from the employees with concerns, not being involved in this situation before thought I would ask for some advice for the following queries..
    Carrying over entitlements
    there has been some concern as several employees have been here for 7/8 years entitling them to pro rata long service and worried that they will lose that in the sale. IF the new owner is carrying over the entitlements then this should be there for them when they are ready to take it or leave and they will continue accruing with the new owner as of the date of new employment contract.
    Can the staff request that their entitlements be paid out at the time of sale and start a fresh with the new owners.
    If the new owners for any reason need to close the business would the redundancies be calculated on the new date or the old date of when the entitlements accrued from. I'm of the opinion that it would be from the new date of employment but one employee has said if they carry over the entitlement then they are acknowledging the period of service as he was advised by a HR expert.
    Any help would be appreciated

  2. Default

    If the employment contracts are being terminated by the original employer, then all entitlements should be paid out at that point, including redundancy and LSL.

    The new owners may not be obliged to acknowledge or take on the liability of certain entitlements accrued with the old employer, including LSL and Redundancy.

    See Employee entitlements on a transfer of business - When businesses change owners - Fair Work Ombudsman

    and When businesses change hands - Fact sheets - Fair Work Ombudsman

    I believe it also depends on whether the new owners are buying the business or the company.

    If a company is sold (rather than just the business) then usually all assets AND liabilities are effectively transferred to the new owner, and new employment contracts are not necessarily needed.

  3. #3
    Join Date
    Apr 2012
    Posts
    192

    Default

    Further to Job Media's advice, I always advise business sellers to terminate and pay out all entitlements and I tell purchasers to do good due diligence and if they want to make job offers to any of the employees, then do so with a new Employment Contract including a probationary period. It is common that sometimes these old employees don't work out with the new owner and the new owner needs to have recourse to terminate within probationary period if it is not working out - new owners represent change, change is jobs, change in processes and some employees are just not open to change.
    Another aspect is that the purchaser and seller need to come to some agreement of a dollar value for both personal carer's leave which will be reset to zero with the new employer. Although this may not be a legal requirement per se, it is about some kind of fairness if an employee has been with the original owner for a long time. The other area is Long Service Leave. The seller is paying out entitlements as at date of sale but if employees don't have enough service to receive any pro rata LSL, the purchaser will be responsible for paying LSL and the original start date would be used. So again, purchaser needs to have some kind of deal with seller whereby purchaser is compensated for these contingencies.
    As to dates, the seller should pay out all entitlements based on the date of hire to the coy to the termination date which might be the sale date or another agreed date with Purchaser.
    Be mindful however that a purchasing company (usually large globals) can take over the company, take all employees on offering new employment contracts but with all entitlements simply transferred to the new owner. The last integration I worked on was like this but within a year, half of the original company's employees had been made redundant for a plethora of reasons - some simply related to the new owner deciding to do away with areas / departments and change the focus of others. That's life I'm afraid
    Tiger

  4. #4

    Default

    Thanks for the advice
    The employees are a bit concerned as there is no mention of redundancy by the old employer just termination of employment and that the new owner/employer will be accepting responsibility for our entitlements but we will be offered new contracts by them. Since found out that the workshop will be employed by one identity and the office staff by another. One office member has already been warned that his role may change under the new employer he is the operations manager dealing with the workshop etc and the new employer is planning to be hands on in that role. He is also in charge of Quality control so that may be his new position.
    As employees everyone is unsure whether we should be receiving redundancies from the old employers upon termination of our contracts.
    the old employers doesn't think so as the new employer is offering new contracts and accepting our entitlements..

  5. #5
    Join Date
    Aug 2007
    Location
    Melbourne, Australia
    Posts
    452

    Default

    I have had some experience in this area, but only where a large multinational acquired a company holus bolus, so new employment contracts were not required.

    I'm no expert, but from a legal perspective I don't see how an employer can terminate employment contracts and not pay out all accrued entitlements.

    Reassurances from the exiting business owner will not hold any weight with the new owner of the business and there is plenty of potential downside for the employees.

    Better to be safe than sorry in my view. Make no assumptions and look after number one.

    If your employment is being terminated get everything you are entitled to and if you're not sure what that is, speak to Fair Work.

  6. #6
    Join Date
    Apr 2012
    Posts
    192

    Default

    Suggest you ask these questions of your current employer. Fact is current employer, once sale is done and dusted, will not be in the wind - the new owner whilst then responsible may try to wriggle out of it. I'd be insisting on written employment offers from the new owner well BEFORE the sale date - those employment contracts need to include a clause relating to redundancy and, more importantly, that prior service (with current owner) will be recognized both for redundancy and other entitlements. That is, if current owner is saying everything will be the responsibility of the new owner, you need to have written confirmation of that - so if all goes belly up later, you have something with which to make a claim.
    Reality, I am afraid, is that some jobs will be changed &/or eliminated or merged with others.
    I recommend a) talk to your coy HR representative, get your assurances in writing; if they are not prepared to do that, then b) contact your union and get them involved on your behalf. Failing that you could contact Fair Work Ombudsman. Just remember the terms and conditions of every business sale are unique to that particular sale and it's all very well for current owner to pass the buck, but he does have obligations and, in the end, it may be your last recourse is to get a lawyer involved on the employees behalf. You could form a small representative group of employees to go to (current owner) management with a list of what you want. It should not be that hard for them to answer your questions - in fact, it's somewhat sloppy on their behalf that they have not had good Q & A/communications with employees already.
    Tiger

  7. #7

    Default

    The owner is the HR for the company - Our termination letters state that the business has been sold as a going concern and all our employment conditions and outstanding entitlements will be transferred to the new business ownership entity should we accept their offer of employment.. no mention of the redundancy or LSL entitlement speficially though he has said there is an amount being paid over to the new business entity for our entitlements.
    no mention on what happens if we don't accept the new offer of employment I assume we just get paid what we are owed annual leave or pro rata long service for those entitlted.
    I have suggested that a list of questions be submitted and see if we can get these concerns addressed. though after reading your response Tiger it seems a good way forward is to submit our questions in writing asking for a formal reply from both parties concerned.. so everyone is on the same page at least.
    I believe some employees are contacting fairwork to ensure what they are being told is correct and they aren't missing out on redundancy or LSL entitlements.

  8. #8
    Join Date
    Jul 2007
    Location
    Canberra
    Posts
    54

    Default

    Transfer of employment from one employer to another in these circumstances is complex. I support some (but not all) of what other contributors have said above. At the risk of over-simplifying, the new operator of the business broadly speaking has 3 options in regard to individual employees of the old operator:
    Option 1: Don't offer employment to the individual;
    Option 2: Offer employment to an individual, but don't recognise their prior service with the former operator;
    Option 3: Offer employment to an individual AND recognise their prior service with the former operator of the business.

    From the point of view of the employee, it's important to get a written contract or offer of employment from the new operator so that you know whether Option 2 or 3 applies to you. This will affect entitlements such as Personal Leave, Annual Leave and Long Service Leave balances, and whether or not the employee would have immediate access to an Unfair Dismissal claim if dismissed by their new employer or would have to serve a new qualifying period first (see section 384 of the Fair Work Act).

    I disagree that all existing entitlements of transferring employees should be automatically paid out by the first employer. For example s.91 of the FWA specifically states that a transferring employee is not entitled to a lump sum payment for accrued Annual Leave if the new employer has recognised the employee's prior service (for Annual Leave purposes) - so the leave should "transfer" across and be available to be taken as paid leave. Long Service Leave is a little harder to be absolute about as Long Service Leave provisions differ from State to State; however most Long Service Leave schemes have provisions for the recognition of prior service in "transfer of employment" situations which would allow the LSL credit to tranfer across.

    When the new employer is offering to recognise an employee's prior service, the transferring leave balances will be a liability (future cost) for the new employer and this would usually affect the financial negotiations between seller and buyer of the business. But a potential transferring employee doesn't care about that - he or she just needs to get an offer of employment in writing so they know whether their former period of service will be recognised or not.

    When employment of a person comes to an end because their business is being sold, the Redundancy provisions of the NES will apply (including any applicable exemptions from redundancy obligations, such as the small business exemption). However the NES provides (in s.122 FWA) that a transferring employee is not entitled to redundancy pay from the first employer if the second employer has recognised their prior service.

    Cheers,
    Greg

  9. Default

    I was under the impression that the old employer had already terminated the employment of workforce, but employees did not at this point have an offer of employment from the new owner. They are currently in "limbo". So at this point in time the employees have nothing in writing to say that (a) they have a job offer, and (b) whether all entitlements are being honoured by the new business owner.

    Therefore the new employer has not yet formally recognised the employee's prior service for the purpose of Annual Leave, or LSL. This is why I was suggesting that the entitlements should be paid out.

  10. #10

    Default

    Thanks Greg for those pointers
    currently we have no contract or assurance from the new employer so unable to see if they are recognising our years of service though the old employer has said that a monetary amount will be paid for our entitlements. He is also saying that because the new emplyer is going to offer new contracts there is no redundancy payable to anyone.
    I think the reason people would prefer to receive their entitlements is the new employer recently purchased another similar business with vendor finance but after a couple of months the vendor resumed ownership of the business. No one knows the in and out of it all but it doesn't inspire confidence.

  11. #11

    Default

    One employee has said they have contacted fairwork and they were forwarded sections of the act stating that if the new employer doesn't recognise the entitlements then the old employer will be responsible for paying out the entitlements and possibly redundancies.
    he also stated that the new contract has to be of similar pay and conditions or redundandies are payable. I haven't read that section as yet but as stated by job media we are in limbo.

  12. #12

    Default

    An update and a few queries
    The new owners came on board and the employees finally got a contract which I drafted for the new owners approval which they made a few changes, otherwise we wouldn't have received one as yet.
    One employee was made redundant. Within two days My job was dissected with the new owner assuming some of my duties as she is an accountant and owns a bookkeeping business where she is getting her offsider to do these duties.
    Unfortunately she hasn't replaced those duties as yet even after I had a meeting with her to discuss the direction of which my job would be taking. In the meeting she indicated that she thought I was good at my job, and she was extremely happy with me then said would I write up a job description for myself.
    what would I put on this job description as I still don't know what i am going to be doing?
    I am wondering where I stand with this as I have tried to get some clear direction form the owners where my job is going, and I would have thought I am entitled to some information as they said from the beginning that nothing would change for anyone.
    To be honest I am thinking it might be time to look for new employment as my job is slowly disappearing piece by piece.
    Is there anything I can do to help this situation work for me.

  13. #13
    Join Date
    Apr 2012
    Posts
    192

    Default

    Quote Originally Posted by Fabsteel View Post
    An update and a few queries
    The new owners came on board and the employees finally got a contract which I drafted for the new owners approval which they made a few changes, otherwise we wouldn't have received one as yet.
    One employee was made redundant. Within two days My job was dissected with the new owner assuming some of my duties as she is an accountant and owns a bookkeeping business where she is getting her offsider to do these duties.
    Unfortunately she hasn't replaced those duties as yet even after I had a meeting with her to discuss the direction of which my job would be taking. In the meeting she indicated that she thought I was good at my job, and she was extremely happy with me then said would I write up a job description for myself.
    what would I put on this job description as I still don't know what i am going to be doing?
    I am wondering where I stand with this as I have tried to get some clear direction form the owners where my job is going, and I would have thought I am entitled to some information as they said from the beginning that nothing would change for anyone.
    To be honest I am thinking it might be time to look for new employment as my job is slowly disappearing piece by piece.
    Is there anything I can do to help this situation work for me.
    Gawd, what a mess..... so in summary, you had a certain position with prior owner, that appears to be in the wind under the new owner who wants you to write your own PD. I suggest you write the PD based on your old job (simply redo your old PD). If new owner rejects that PD, you might be able to claim that as your job (to which you were hired originally) is in fact redundant, and so far no reasonable alternative role has been offered, you suggest they pay your your redundancy entitlement and you move on. It sounds to me like the new owner hasn't a clue as to their obligations. Further however, as you got a letter of offer (the one you drafted!) then obviously your role was stated in that and you both signed? If so, and they now want to change it, this further supports suggestion your role is redundant.

    If (as it sounds like they do) want to retain you, the alternative job offer has to have some kind of fit with your skillset at the same rate of pay at least. If it doesn't, you don't have to accept it. The new owner could apply to FW to vary (reduce) amount of severance paid to you because they offered you an alternate job which you rejected but otherwise you'd be entitled to something.

    Personally, I agree with your thinking that it's time to update your CV and move on.

    Tiger

  14. #14

    Default

    Well I actually said to the owners if you are changing my position you at least have to liaise with me during the process. And if there is no alternative within the company might as well just pay me out as you are outsourcing my role. Problem is what they halfhearted suggested was some data entry for the project assistant, which I could do in my sleep. Placing paint numbers on a spreadsheet I'm sure is not the best use of my skillset. The pay actually went up because they didn't want to give me a fuel card which I had with the previous company for 3 years because of FBT implications for them, so they raised the pay to compensate.
    The owner who owns the bookkeeping business has suggested if I get bored maybe help that business out while being paid by this company, not sure if the other director would be pleased with that suggestion. He is already annoyed that my work has been outsourced to this company

  15. #15

    Default

    Hi
    Quick question i have since left the company back in March and upon checking my super account in May found they hadn't paid it still.
    I asked the directors what was going on one replied that they were balancing the super still and it would be paid shortly.
    there is a salary sacrifice in this super payment also.
    I thought it had to be paid within 28 days on the end of month for salary sacrifice and the last date for the quarter super was 28/04/2015.
    Is there anything i can do other than keep emailing or is my only avenue to get the Ato super involved??

    none of the other employees have had theirs paid either upon checking their accounts...

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