Compared to the provisions in the now repealed "Work
Choices" amendments to the Workplace Relations Act 1996, the
Transfer of Business provisions contained in Part 2-8 of the Fair
Work Act 2009 ("the Act") provide greater certainty and
flexibility for employers in a time of rapid change in modes of
The former provisions required the courts to determine on a case
by case basis the 'character' of the business in order to
determine whether there had been a "succession, assignment or
transmission" of it.
Whether a transfer of business has occurred no longer depends on
the application of the common law 'business character'
test. Nor is it essential that there be a sale of business or
assets of the business. Instead, the new provisions focus on
whether employees (there must be at least one) transferring from
the old employer to the new employer will be doing the same or
substantially similar work and whether there is a
'connection' between the two employers.
The "connection" exists between the two employers (or
entities associated with them) if:
the new employer owns or beneficially uses some of the assets,
related to the transferring work, which were owned or beneficially
used by the old employer: s311(3);
the old employer has outsourced the transferring work, being
performed by one or more transferring employees, to the new
the new employer has 'in-sourced' the transferring work
which was previously outsourced: s311(5); or
the new and old employers are associated entities at the point
in time when the transferring employee commences work with the new
Section 313 provides that where there is a transfer of business,
transferring employees who were covered by an enterprise agreement,
workplace determination or modern award with their old employer
will remain covered by those instruments exclusively and
indefinitely (at least until the instrument terminates or is
replaced), during their employment with the new employer. This
contrasts with the 12 month limit imposed by Workchoices on the
life of the transferred instrument. Section 314 provides that any
new employees who are employed by the new employer to do
'transferring work' will also be covered by the
'transferable instrument' with the intention of ensuring
that workers performing the same work are employed under the same
terms and conditions.
But arguably the most important provisions of Part 2-8 are those
found in Section 320, which gives Fair Work Australia a very broad
discretion to vary a transferable instrument in a number of ways,
including enabling a transferable instrument to "operate in a
way better aligned to the working arrangements of the new
employer's enterprise": s320(2)(c). Importantly, Part 2-8
allows a business that is considering a purchase or takeover of
another business to apply to FWA in advance of the proposed
transfer, seeking an order that the old instrument not transfer.
FWA has shown that it is willing to assist in these cases.
In exercising its powers under sections 318, 319 and 320, FWA is
required to take into account several factors in deciding whether
to make the order sought. These factors include:
the views of the new employer and the employees who would be
affected by the order;
whether any employees would be disadvantaged by the order in
relation to their terms and conditions of employment;
whether the transferable instrument would have a negative
impact on the productivity of the new employer's
whether the new employer would incur significant economic
disadvantage as a result of the transferable instrument covering
the new employer;
the degree of business synergy between the transferable
instrument and any workplace instrument that already covers the new
A 2009 survey of HR managers conducted by the Australian Human
Resources Institute reported that only 7% of respondents thought
that the transfer of business provisions would benefit their
organisation. However, in several cases, FWA has demonstrated its
willingness to modify the usual operation of the Part 2-8
provisions if the circumstances of a particular transfer warrant
such a departure. Usually it has been employers who apply to FWA
for these orders.
In any transfer of business situation, specialist advice should
be sought about how the Fair Work Act will apply to staff
transfers, and what options are available to tailor arrangements to
suit the business.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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