Long-Service Employee’s Service Carried Across Business Transfer

Case: Sherwood v Milestone GI Pty Ltd [2019] FWC 476
Decision date: 25 January 2019
Commission Member: Deputy President Clancy
Outcome: Minimum employment period objection dismissed

Overview

The Fair Work Commission rejected an employer’s jurisdictional objection that a dismissed employee had not completed the minimum employment period required to make an unfair dismissal application.

The employee had worked for the former business for more than 10 years before the business was transferred to a new owner. Although the new employer argued that her employment with it had lasted only around eight weeks, the Commission found that her earlier service counted towards her period of employment.

The decision illustrates the importance of identifying whether a transfer of business and transfer of employment have occurred when determining an employee’s eligibility to pursue an unfair dismissal claim.

Background

The employee commenced full-time employment with Australian Consolidated Insurance Services (ACIS), the business operated by the Richard L Matthews Family Trust, on 10 February 2008. She worked as Fire Manager in the Mount Waverley office.

In September 2018, the business transferred to Milestone GI Pty Ltd. The business continued trading as ACIS from the same premises. Its clients, client lists, work, furniture and equipment transferred to Milestone, and the employee continued performing substantially the same role.

The employee’s long service leave and personal leave transferred to Milestone. Her accrued annual leave was paid out by the former business.

On 30 October 2018, her employment was terminated on the stated ground of redundancy.

Milestone argued that she had only been employed by it from 5 September 2018 and therefore had not completed the one-year minimum employment period applicable to a small business employer.

The legal issue

The question was whether the employee’s service with ACIS counted as service with Milestone for the purposes of the minimum employment period under the Fair Work Act 2009.

The Commission considered the provisions dealing with:

Section 311: When a transfer of business occurs.
Section 22: When service with one employer counts as service with another employer following a transfer of employment.
Sections 382–384: Protection from unfair dismissal and the minimum employment period.

Milestone was accepted to be a small business employer, meaning the relevant minimum employment period was one year.

Commission’s findings

A transfer of business had occurred

The Commission found that the employee had moved to Milestone within three months of the end of her employment with ACIS and performed the same or substantially the same work.

There was also a connection between the businesses. Milestone acquired the ACIS client list and clients, used assets associated with the work, and operated from the same premises.

The Commission was therefore satisfied that a transfer of business had occurred and that the employee was a transferring employee.

The employee’s previous service counted

ACIS and Milestone were not associated entities. However, under s 22(7)(b), a transfer of employment can occur between non-associated entities where the employee is a transferring employee in a transfer of business.

The Commission found that the employee’s service with ACIS counted as service with Milestone under s 22(5).

Section 384(2)(b) provides an exception where the new employer informs the employee in writing, before the new employment starts, that the earlier service will not be recognised.

Milestone’s director wanted a “clean cut” between the periods of employment. However, he conceded that the employee had not been informed in writing before commencing with Milestone that her previous service would not be recognised. The issue had not been discussed.

As a result, the employee’s approximately 10 years and eight months of service with ACIS counted towards her period of employment with Milestone.

Outcome

The Commission dismissed Milestone’s jurisdictional objection. The employee had completed the relevant minimum employment period and could proceed with her unfair dismissal application.

The matter was remitted to the Unfair Dismissal Case Management Team for further programming.

The decision did not determine Milestone’s other objections, including its arguments that the dismissal was a genuine redundancy and that it had complied with the Small Business Fair Dismissal Code.

Significance

The decision confirms that a change in business ownership does not necessarily reset an employee’s service for unfair dismissal eligibility.

Where a business transfers to a new employer, service with the former employer may count even where the employers are not associated entities. The statutory exception requires the new employer to have provided written notice, before the new employment commenced, that the earlier service would not be recognised.

Employers and employees should therefore examine the substance of a business transfer and the statutory service provisions, rather than relying only on the date employment formally commenced with the new entity.

Representatives

Applicant: N Dircks, paid agent
Respondent: Zik Cai, Director of Milestone GI Pty Ltd