Transfer of employment to an associated entity

2 January 2020

An employee's service won't be considered continuous in a transfer of business situation unless certain criteria are met. 

I'll walk you through the criteria in this article.

Continuous service

In a transfer of employment situation, an employee’s service for their old employer will count towards their service period with the new employer per s.  22(7) Fair Work Act 2009 (Cth) if:

  • the entities are associated; and
  • if the employee becomes employed by the new associated entity within 3 months; also

the new employer must not have informed the employee in writing before the new employment started that their previous period of service with the old employer would not be recognised: s. 384 Fair Work Act 2009 (Cth).

If the above criteria has been met, the employee’s employment has transferred, its continuing and the employee is simply working for an associated entity. 

Below we’ll go through the associated entity definition so this criteria is clear. 

Associated entity

What is an associated entity?

The associated entity meaning is found in s.50AAA of the Corporations Act.

An entity (the associate) may be an associated entity of another entity (the principal) in these cases:

  • the associate and principal are related bodies corporate
  • the principal controls the associate
  • the associate controls the principal and the operations, resources or affairs of the principal are material to the associate
  • the associate has a qualifying investment in the principal, has significant influence over the principal and the interest is material to the associate
  • the principal has a qualifying investment in the associate, has significant influence over the principal and the interest is material to the principal, or
  • a third entity controls both the principal and the associate and the operations, resources or affairs of the principal and the associate are both material to the third entity.

Because one feature of an associated entity is that the principal controls the associate, we’ll look at the definition of control next.

Control

Control is defined in s.50AA of the Corporations Act. 

One entity controls another when the first entity can make decisions that determine the financial and operating policies of the second entity.

Do you have questions or comments about a transfer of employment? Be sure to leave them below. 


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Vivian Michael
 

Vivian Michael is a lawyer and founder of Michael Law Group. Vivian's mission is to deliver the best quality business legal services to entrepreneurs launching an Australian business, wherever they are in the globe.

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