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11 March 2022

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Employment Law
Federal

Asked

Employee or independent contractor transfer

Our client is an employer who has set up a new labour hire entity. We need to transfer current employees and subcontractors to that entity.

Do we prepare new employment agreements and job offers from the new labour hire entity or will a transfer of employment letter suffice?

Answered

Thank you for the question.

Under contract law principles, employees cannot be unilaterally transferred from one employer to another. The employee must accept an offer of new employment from the new employer. This can be achieved either by issuing new employment agreements or by a letter of offer. In either case, the identity of the new employer must be clear and the complete terms of the new employment set out, including amendments to previous terms or those that will remain unchanged. To avoid the potential for confusion, new employment contracts are more common. 

The question refers to transferring both employees and independent contractors.

For employees, Division 2 of the Fair Work Act 2009 applies and governs the transfer of industrial instruments when employees are transferred from one entity to another.

For independent contractors, a close examination of their working arrangements is required to ensure that they are not in reality employees to whom Division 2 of the Act applies. The By Lawyers Employment Law publication provides:

The relationship between the hire agency and the worker may be one of employment or may be one of independent contractor. Many hire agencies employ workers as casual employees. Whether there is an employment relationship between the host firm and the worker can be a complicated question.

See Employee versus independent contractor in By Lawyers 101 Employment Law Answers for more information and cases on this point, especially the significant recent decisions of Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2.

Regards,

Mentor