New qualifying period for employees after a transmission of business

The transmission of a business can have various effects on the rights of employees who have their employment transferred from the vendor to the purchaser.

A key question concerns whether these employees are required to serve a new unfair dismissal qualifying period if they are employed by the purchasers. If they are, then they do not have jurisdiction to bring an unfair dismissal claim should they be dismissed during the qualifying period.

Purchasers of businesses commonly find that a new qualifying period provides flexibility and a chance to test pre-existing employees within a new business model. Conversely, employees transferring to a new employer (especially those who were long-standing employees of the previous owner) see the imposition of a qualifying period as seriously undermining their job security.

The Australian Industrial Relations Commission (Commission) recently confirmed that employees are required to serve a new unfair dismissal qualifying period when employment with the new owner of a business begins.

In Aged Care Services Australia Group Pty Ltd [2008], ¹ the Full Bench of the Commission confirmed that employees are unable to bring unfair dismissal claims against a new employer if they are yet to serve out a six month qualifying period required under the Workplace Relations Act 1996 (Cth), following the transmission of a business.

Aged Care Services dismissed employees (who were taken on from the previous employer and had at least 12 months service in the business) only three months after acquiring the business.

Although Aged Care Services gave the employees a written assurance that there would be no change in entitlements, the Commission found that this did not amount to a waiver of the employees’ qualifying period.

Interestingly, Commissioner Lewin dissented finding in favour of the employees arguing that written communications between the employees and Aged Care Services gave rise to a conclusion that there was an agreement by the new employer to remove the requirement for employees to serve a new qualifying period.

This decision highlights that employers are able to dismiss employees within six months of a business transmission where no prior agreement to reduce the qualifying period has been entered into between the parties and in so doing have confidence that the unfair dismissal laws will not apply.