Informing employees when prior service will not be recognised in a transfer of business
The CaseKelly Harland v Paradigm Cleaning & Professional Services Pty Ltd (2015)
Ms Harland was working for Australind Cleaning Services Pty Ltd (Australind) when it was purchased by Paradigm Cleaning and Professional Services Pty Ltd (Paradigm). In a letter dated 23 January 2015, Paradigm advised Ms Harland that it would be her new employer from 1 February 2015.
In the letter, Paradigm told Ms Harland: “Please be advised since Paradigm Cleaning & Professional Services Pty Ltd will be your new employer, all employment-associated wages and entitlements, including any leave, will start afresh as of 1 February 2015. If you have any approved leave prior to change of management, please ensure that you complete a leave request and return to the office.”
On 29 July 2015, Paradigm terminated Ms Harland’s employment. Ms Harland made an unfair dismissal claim. Paradigm objected on the basis that Ms Harland had not served 6 months’ employment with them, and hence had not satisfied the minimum employment period required to bring an unfair dismissal claim.
The Fair Work Commission (FWC) found that Ms Harland’s employment with Australind counted towards her service with Paradigm because Paradigm had failed to clearly notify Ms Harland that her prior period of service with Australind would not be recognised, as required under section 384(2)(b)(iii) of the Fair Work Act 2009 (Cth) (FW Act). The FWC found that the notification that Paradigm provided to Ms Harland was ambiguous and inadequate.
The FWC indicated that “the statement that previous entitlements including leave entitlements will start afresh is not the same as a statement that previous service will not be recognised” and that “the requirement in the legislation must be strictly followed before an employee’s rights are extinguished”.
As such, Ms Harland was able to continue her unfair dismissal claim against Paradigm.
If you purchase a business under a transfer of business arrangement, you must clearly notify your future employees, in writing, if you do not intend to recognise their prior period of service with the former employer.
Failure to provide this notification may expose you to the risk of unfair dismissal claims and further employment entitlement claims. For example, the FWC may find that an employee who has not received a notification compliant with the FW Act is entitled to a severance payment calculated on the employee’s full length of service with both you and their former employer.
Given the serious potential financial consequences involved, make sure your notifications to employees are clear and in accordance with the FW Act.
Please note: Case law is reported as correct and current at time of publishing. Be aware that cases in lower courts may be appealed and decisions subsequently overturned.
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