14 December 2018
Transferring employees from one company to another
A company has purchased the business of another company which includes its employees in the business. We are unsure what to do about the employment agreements currently signed with the old company. Please advise.
Thank you for the question.
The following is an extract from the By Lawyers Sale of Business and Franchise (NSW) commentary:
As an employment relationship is a personal relationship between an employer and employee, under general contract law principles the employment contract cannot be unilaterally ‘transferred’ from one employer to another. Employees are free to either accept or reject offers of employment from the purchaser. A common procedure is as follows:
1. Employees are notified by the vendor that their employment will come to an end on a particular date, generally the completion date.
2. Concurrently with the above notification, the employees are provided with an offer of employment by the purchaser including details of what entitlements, if any, accrued in the service of the vendor are recognised.
The client and each employee should enter new employment contracts.
Regards
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