Employee Rights When an Undertaking is Transferred in Australia

1. Employees’ Rights

The Fair Work Act sets out a range of provisions that deal with the rights of employees where their employment changes as a result of a transfer of business. These provisions govern situations where a business is transferred from one employer (e.g. a company) to another. Typically, a transfer of business takes place when an employer buys or sells a business, and not merely when there is a sale of the shares in the business.

To be a valid transfer of business, the employment of a transferring employee must be terminated with the old employer. Then, within three months following the termination, the employee is reemployed by the incoming business owner. The usual practice is for the new employer to issue, at the time of purchasing the business, a list that sets out those persons whom the business intends to reemploy. It is also a requirement that the work performed by the transferring employee is the same or substantially the same as the work previously performed.

2. Requirements for Predecessor and Successor Parties

Where a transfer of employment occurs, the transferred employee’s service with their original employer will be counted as continuous service with their new employer. As such, any benefits acquired under the NES (such as annual leave) will be retained through the transfer of business and the employee’s service will remain continuous in the eyes of the law (even in circumstances where there has been a substantial period of inactivity).

However, should the new employer fail to recognise these accrued rights, the original employer must pay out all entitlements accrued under the NES. This may only occur in the case of non-associated entities. The same entitlements exist in relation to redundancy.

For more information on these articles or any other issues involving labour and employment matters in Australia, please contact Michael Harmer, Partner at Harmers Workplace Lawyers ( at
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