Length of service, transferring employees and unfair dismissal

April, 2016

By Clayton Payne, Special Counsel

A worker’s employment continues with a new employer following the sale or transfer of a business. Will the length of employment with the previous employer be considered as service with the new employer in relation to that employee having access to the statutory unfair dismissal jurisdiction?

These matters were recently considered by the Fair Work Commission (the Commission) in Vosper.

The Facts

The worker had been employed by their previous employer in a permanent part-time position for two years prior to the transfer of the business. The worker was a transferring employee with her new employer (which was a small business).

The worker was employed by the new employer, on the same terms of employment, hours of work and rate of pay as with her previous employer. However, the worker’s accumulated annual leave entitlements were paid out by the previous employer prior to the transfer of the business.

Two months following the transfer of the business, the worker was dismissed from her part time employment. She was also offered ongoing casual employment at a lower base pay rate (excluding casual loading).

The following day, the new employer advised the worker that she was in fact being dismissed without notice. This was because the worker had allegedly discussed the change in her employment with her sister-in-law, who was an owner of the previous employer. The new employer claimed that this amounted to a breach of confidentiality.

Decision

The Commission found that the worker had more than 12 months’ continuous service with the new employer and could therefore access the unfair dismissal jurisdiction of the Fair Work Act 2009 (Cth) (the Act).

In particular, it was found that the worker had not been advised in writing by the new employer that the period of service with the previous employer would not be recognised, as required by section 384 of the Act. The Commission also found an assertion by the previous employer that the worker “…starts fresh with you guys” (i.e. the new employer) and the fact entitlements were not transferring, was a completely separate matter to the issue of recognition of service in this context.

The Commission found no basis for termination on the grounds of performance concerns, given these concerns were only actually raised at the termination meeting, and the worker had not been formally warned, or given the opportunity to respond. In relation to the issue of a breach of confidentiality, the Commission found:

“We do not live in a society where employees are prohibited from discussing their employment status or their treatment at work with others.”

Despite changes to the worker’s duties following the transfer of the business, and the Commission’s view that the new employer may have in fact had a genuine basis for making the worker’s position redundant, it was found that the new employer failed to satisfy the requirements of the consultation clause of applicable Modern Award. The new employer was ordered to pay the worker compensation.

Conclusion

This case shows that care needs be taken in relation to whether the previous service of an employee should be recognised in a transfer of business situation. In this case, a failure by the new employer to advise the worker in writing that her previous service would not be recognised, unnecessarily exposed it to an unfair dismissal claim.

The case also highlights the importance of employers following consultation provisions in Modern Awards leading up to a decision being made to make an employee redundant.

Contact Mills Oakley

For more information, please contact:

Ross Levin | Partner
Melbourne
T: +61 3 9605 0070
E: rlevin@millsoakley.com.au

Malcolm Davis | Partner
Sydney
T: +61 2 8035 7932
E: mdavis@millsoakley.com.au

Adam Lunn | Partner
Melbourne
T: +61 3 9605 0868
E: alunn@millsoakley.com.au

Lisa Anaf | Partner
Melbourne
T: +61 3 9605 0857
E: lanaf@millsoakley.com.au

 

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