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What Is a Transfer of Employment?

What Is a Transfer of Employment?

A transfer of employment occurs where a person is employed by an associated entity within 3 months of termination by the former employer. Read more here.

31st July 2020
Reading Time: 3 minutes

A transfer of employment is when a person is employed by a second employer within three months of the termination of the employee’s work by a first employer. Additionally, and the first and second employers are associated entities.

Associated Entity

The Corporations Act 2001 defines an associated entity as:

  • the associate and principle are related bodies corporate
  • the principal controls the associate
  • the associate controls the principal and the operations, resources or affairs of the principal are material to the associate
  • the associate has a qualifying investment in the principal; and
  • has significant influence over the principal, and the interest is material to the associate
  • a third entity controls both the principal and the associate; and
  • the operations, resources or affairs of the principal and the associate are both material to the third entity

Furthermore, an employee’s service with one employer will count as service with a second employer in different cases; it depends on the relationship that these two employers have.

Transfer of employment between associated entities

A period of service by a national system employee with their national system employer is a period during which the employer employed the employee, but does not include any period that does not count as service. Periods that do not count as service are any period of:

  • Unauthorised absence
  • Unpaid leave/unpaid unauthorised absence other than:
    1. Community service leave
    2. A period of stand down under an enterprise agreement that applied to the employee

Firstly, an employee’s service counts as service with another employer if two conditions apply:

  1. Any period of the employee with the first employer counts as service of the employee with the second employer; and
  2. The period between the termination of the employment with the first employer and the start of the employment with the second employer does not break the employee’s continuous service with the second employer

Transfer of employment between non-associated entities

Service with one employer will count as service with another employer that is not an associated entity of the first employer if the employee is a transferring employee concerning a transfer of business from the first employer to the second employer.

The following conditions need to be satisfied:

  • The employee is a transferring employee in relation to a transfer of business from the first employer to the second employer
  • The first employer and the second employer are not associated entities when the second employer employs the employee

Transfer of Business

The transfer of business provisions under the Fair Work Act 2009, deals with situations where a business transfer occurs from one national system employer (e.g. a company) to another national system employer.

Examples of transfers of employment

The Hill Case

An employee worked for the old employer in a cafe. The new employer purchased the business. The employee worked three shifts for the new employer doing the same work before their dismissal.

The court held that there was a transfer of employment because they found a transfer of business between the old employer and the new employer. There was a connection between the former employer and the new employer as the transfer of business involved a transfer of assets. Furthermore, as the new employer did not inform the employee in writing that his previous service would not be recognised, the employee’s service with the old employer counted as service with the new employer.

The Thorne Case

The employee worked for the old employer, which provided labour to the new employer. After two years, the new employer ceased to outsource work to the former employer. The old employer terminated the employee’s employment, and the new employer employed the employee but dismissed them after about three weeks.

The court found the employee to be a transferring employee concerning a transfer of business. There was a connection between the old employer and the new employer because the new employer had ceased outsourcing work to the former employer. The employee was not informed in writing by the new employer that previous service with the old employer would not count as service with the new employer, and therefore it did count.

Examples that are not a transfer of employment

The Szybkowski Case

The employee worked as a security guard for the old employer, which provided site security under contract. A process resulted in the new employer receiving the contract. The employee received an offer for employment with the new employer but then subsequently dismissed the following month. The court found that there no connection between the employers, and therefore no transfer of business. As such, service with the old employer did not count as service with the new employer.

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Author
Daniel Alkurdi

Daniel is a legal intern at Lawpath, working in the content team. He is currently studying a Bachelor of Laws and a Bachelor of Economics at the University of Technology Sydney. He is interested in the areas of public, commercial and workplace law.