Fair Work Amendment (Transfer of Business) Act 2012

The Fair Work Amendment (Transfer of Business) Act 2012 is an amending Act. Its main effect was to insert Part 6-3A into the Fair Work Act 2009, dealing with transfers of business from a State public sector employer to a national system employer.

In practical terms, the legislation is designed to preserve certain State-based employment terms when employees move out of State public sector employment and into national system employment as part of a transfer of business. It does this by creating a new federal instrument for each affected employee, called a copied State instrument.

That matters because a business taking over work from a State department, agency or other State public sector employer may inherit more than staff and operational know-how. It may also need to comply with enforceable employment terms that mirror the State award or State employment agreement that applied immediately before the employee left the State employer.

The regime is targeted. It applies where the old employer is a non-national system employer that is a State public sector employer, and the new employer is a national system employer. The employee must have been a State public sector employee of the old State employer before the move.

This means the legislation is not the rule for every transfer of staff between employers. It is specifically about movement from State public sector employment into the national system. Ordinary private sector acquisitions, outsourcing arrangements and restructures are not brought into this regime just because employees move between employers.

It is also important not to assume that every government-related body is covered. The key question is whether the old employer is in fact a State public sector employer for the purposes of the legislation. The text here does not establish a broader rule for private sector transfers generally, and businesses should verify the status of local government bodies or other public entities before assuming the copied State instrument rules apply.

A transfer of business occurs only if all of the statutory requirements are met. First, the employee's employment with the old State employer must have terminated. Second, within 3 months after that termination, the person must become employed by the new employer. Third, the work they perform for the new employer must be the same, or substantially the same, as the work they performed for the old State employer. Fourth, there must be a qualifying connection between the old State employer and the new employer.

The legislation recognises several kinds of connection. One is an asset connection, where under an arrangement the new employer or its associated entity owns or has the beneficial use of some or all of the assets that the old State employer or its associated entity owned or used, and those assets relate to or are used in connection with the transferring work. Another is outsourcing, where the old State employer or its associated entity outsources the transferring work to the new employer or its associated entity. A third is where the new employer is an associated entity of the old State employer when the employee becomes employed by the new employer.

These trigger points are important because businesses often focus on the commercial handover and overlook the employee-level test. The copied State instrument rules are not activated just because a contract changes hands or a service moves to a private operator. They depend on the employee being re-employed within 3 months, doing the same or substantially the same work, and there being the required connection between the employers.

The Act also defines timing concepts that matter in practice. The employee's termination time is the start of the day their employment with the old State employer ends. The re-employment time is the start of the day they become employed by the new employer. Those timing rules affect when copied State instruments come into operation and when they begin to cover the employee and new employer.

If there is a transfer of business, the legislation creates a copied State instrument for the transferring employee. This is a federal instrument and it is enforceable under the Fair Work Act.

There are two main types. A copied State award copies the terms of a State award that covered the transferring employee and the old State employer immediately before the employee's employment ended. A copied State employment agreement copies the terms of a State employment agreement that covered the transferring employee and the old State employer immediately before termination.

That distinction matters. A State award and a State employment agreement are not the same thing, and the copied federal instrument takes its character from the original State instrument. The legislation also says that if the original State agreement was a collective State employment agreement, the copied instrument is a copied State collective employment agreement. If the original State agreement was an individual State employment agreement, the copied instrument is a copied State individual employment agreement.

The copied instrument is taken to come into operation immediately after the employee's termination time. But it does not apply to the employee or new employer before the employee becomes employed by the new employer. In other words, the instrument exists from immediately after termination, but practical coverage of the employee and new employer starts from the re-employment time in relation to the transferring work.

The copied instrument is taken to include the same terms as were in the original State instrument immediately before termination. If the original terms were affected by an order, decision or determination of a State industrial body or a State court that was in operation immediately before termination, the copied instrument is taken to be similarly affected.

A copied State instrument covers the transferring employee and the new employer in relation to the transferring work from the employee's re-employment time. The legislation is careful to tie coverage to the transferring work, not necessarily every task the employee may later perform.

The instrument applies to the employee or an organisation if it covers that person, is in operation, no other provision says it does not apply, and immediately before termination the employee or organisation would have been required or entitled under State law to comply with or enforce the original State instrument. For employers, the legislation similarly looks back to whether the old State employer would have been required or entitled under State law to comply with or enforce the original State instrument.

The Act also contemplates later transfers. A copied State instrument may apply to another employer, not just the first new employer, if there is a later transfer of business under the Fair Work Act framework. That means businesses involved in a second or later handover should not assume the copied instrument disappears after the first transfer.

For businesses, the practical point is that you should not assume the copied instrument applies to every former State employee you hire, or to every part of their role. Check the transfer conditions, the employee's dates, the original instrument, and whether the employee is performing the transferring work to which the copied instrument attaches.

The legislation treats copied State awards and copied State employment agreements differently, and this is one of the most important distinctions for employers to understand.

A copied State award ceases to operate at the end of the default period of 5 years starting on the day the employee's termination time occurred, unless regulations prescribe a longer period or allow an order extending the period and such an order is made. Once a copied State award has ceased to operate, it can never operate again.

A copied State employment agreement works differently. It ceases to operate when it is terminated, and that may happen before or after its nominal expiry date. The nominal expiry date is generally the day the original State agreement would nominally have expired under State industrial law, but if that day falls after the end of 4 years beginning on the day the employee's termination time occurs, the nominal expiry date is capped at the last day of that 4-year period.

The key practical point is that nominal expiry is not the same as automatic termination. A copied State employment agreement can continue to operate until it is actually terminated, even if its nominal expiry date has passed. By contrast, a copied State award generally has a fixed operating life unless lawfully extended. Once any copied State instrument ceases to operate, it cannot be revived.

The National Employment Standards remain the floor. If a term of a copied State instrument is detrimental to the employee in any respect when compared with an entitlement under the NES, that term has no effect to the extent of the inconsistency.

The legislation also adapts some NES provisions so they work with copied State instruments after the employee's re-employment time. These include provisions dealing with averaging of hours, cashing out annual leave, cashing out personal or carer's leave, evidence requirements for personal or carer's leave, substitution of public holidays, notice of termination by an employee, some redundancy pay exceptions, and school-based apprentice and trainee loadings. There is also a specific rule dealing with shiftworker annual leave entitlement.

For modern awards, the position depends on the type of copied instrument. While a copied State award covers the employee or employer and is in operation, a modern award does not cover them in relation to that employee, subject to the statutory qualifications. For a copied State collective employment agreement, if both it and a modern award apply, the copied State collective employment agreement prevails over the modern award to the extent of inconsistency.

The legislation also recognises that if, after the employee's re-employment time, an enterprise agreement starts to cover the employee, a copied State instrument may cease to cover the employee and employer under the Fair Work Act rules. Businesses planning to move transferred employees onto a new enterprise agreement should check the coverage and cessation rules carefully rather than assuming the copied instrument simply falls away on its own.

The clearest direct obligation in the inserted Part is that a person must not contravene a term of a copied State instrument for a transferring employee that applies to the person. The legislation states that this is a civil remedy provision.

In practice, that means a new employer needs to identify whether a copied State instrument exists, what type it is, what terms it contains, when it applies, and whether any later event has changed coverage. Because the copied instrument mirrors the original State instrument immediately before termination, businesses should obtain and review the actual State award or State employment agreement, including any operative orders, decisions or determinations affecting it.

Payroll and HR teams should also map the copied terms against the NES. If a copied term is less favourable than the NES, the NES prevails to that extent. If the business already has a modern award or enterprise agreement framework for the rest of its workforce, it should not assume those settings automatically apply to the transferred employees.

Where a business is negotiating a new enterprise agreement or considering steps that may affect coverage, it should check whether the copied instrument is a copied State award or a copied State employment agreement, because the interaction rules and end points differ. It should also keep records of termination dates, re-employment dates, the employee's role before and after transfer, and the connection between the old and new employer.

This page is a practical overview only. Before acting, a business should confirm the identity and legal status of the old employer, the employee's termination and re-employment dates, whether the work is the same or substantially the same, and what connection exists between the old and new employer.

It should also obtain the original State instrument and check whether any State order, decision or determination affected it immediately before termination. If the business is relying on a copied State employment agreement, it should separately check the nominal expiry position and whether the agreement has actually been terminated. If it is relying on a copied State award, it should check whether the default 5-year period has ended or whether any lawful extension applies.

These issues are often transaction-specific. A small difference in timing, work performed, transfer structure or instrument type can change whether a copied State instrument applies at all, what it contains, and when it stops operating or covering the employee.

The Act received Royal Assent on 4 December 2012 and commenced on the day after Royal Assent. It is in force.

Because this legislation amends the Fair Work Act 2009 and related legislation, businesses should read it together with the current Fair Work Act provisions if they need to apply the rules to a live transaction, outsourcing arrangement or workforce change.