A simple breakdown of transfer of employment between associated entities

Wanting to learn about transfer of employment between associated entities and how it can affect you or your business? This Business Kitz blog is going to break it down and give a simple explanation of what is required, how to transfer employments and an explanation of what an associated entity is.

What is transfer of employment?

Depending on the connection between the two employers, service with one employer will count as service with a second employer under different conditions. It is important to determine and understand if your employer is an associated entity or not. In a company transfer, an employee’s service may not necessarily be continuous, which is significant as it affects employee and employer rights to entitlements and potentially unfair dismissal claims.

How do I transfer employment between associated entities?

If two requirements are satisfied, service with one employer (first or old employer) will count as service with another employer (second or new employer). The requirements are

• the second employer is an associated entity of the first employer; and
• an employee becomes employed by the second employer within three months of their employment is terminated by the initial employer.

What is an associated entity?

To view a complete definition of an associated entity, you can visit  s.50AAA  of the Corporations Act 2001.

An entity (the associate) may be an associated entity of another entity (the principal) if one of the following circumstances apply:

• the associate and the principal are related bodies corporate;
• the principle dictates the associate;
• the associate has authority over the principal, and the principal’s activities, resources, or affairs are important to the associate;
• the associate has a qualified investment in the principal, considerable control over the principal, and the interest is material to the associate;
• the principal has a qualified investment in the associate, the associate has considerable control over the principal, and the principal’s interest is material; or
• a third entity controls both the principle and the associate, and the principal’s and the associate’s activities, resources, or affairs are both material to the third organisation.

The term control is defined in s.50AA  of the Corporations Act. When one entity influences another, it can make decisions that affect the second firm’s financial and operating policies.

As an employee, how do I know if my job will transfer?

If you are an employee wondering if your job will continue following a business transfer, you should check to see if there was a transfer to an affiliated business; you can conduct an Australian Securities and Investment Commission search or have a lawyer assist you with this.

Further, check whether you have a letter from your new employer declaring that your previous job term will not be recognised. If you have such a letter, your employment will be terminated. Your employment begins again when you signed a new contract or began working for the new employer’s company. This may affect your capacity to seek unfair dismissal and other claims, therefore you should seek legal counsel.

If you are an employer acquiring a business with a relationship to the previous business (an affiliated entity), consult with your lawyer to see whether a past employment period will be recognised.

Legal advice

If you require assistance regarding transfer of employment between associated entities you should seek legal advice. Our sister company, Legal Kitz can assist with ensuring that your matter is dealt with timely and as cost-efficient as possible. Click here to book a FREE consultation with one of our highly experienced solicitors today, or contact them at info@legalkitz.com.au or by calling 1300 988 954. If you would like to view any legal templates that Business Kitz offers, click here.