Long service leave - What happens when business ownership changes?

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This page provides information on the provisions of the Long Service Leave Act 1958 (WA).  For more information see the main Long Service Leave page.

To be entitled to long service leave under the Long Service Leave Act, an employee must have continuous employment with ‘the same employer’.

An employer includes sole traders, partnerships, companies, incorporated associations, unincorporated associations and public sector agencies and authorities.

Under the Long Service Leave Act, the same employer includes a related body corporate. ‘Related body corporate’ has the same meaning as defined in section 9 of the Commonwealth Corporations Act 2001. An employee's service with a related body corporate is considered to be a part of the employee's period of continuous employment with the same employer.

‘The same employer’ also includes employers who previously owned a business, where there has been a:

  • ‘transmission of business’ (for changes of business ownership before 20 June 2022); or
  • 'transfer of business' (for changes of business ownership on or after 20 June 2022).

The Long Service Leave Act provisions dealing with changes of business ownership changed on 20 June 2022. The transfer of business provisions apply to changes of business ownership that occurred on or after 20 June ​2022. The previous transmission of business provisions apply only to changes of business ownership that occurred before 20 June ​2022. 

Transfer of business and change of employer on or after 20 June 2022

The transfer of business provisions in the Long Service Leave Act apply to changes of business ownership that occurred on or after 20 June ​2022.

A transfer of business commonly occurs via the sale of a business and an employee of the old owner/employer becomes an employee of the new owner/employer. A transfer may also occur in other ways, including by succession or assignment.

If there has been a transfer of business:

  • a transferring employee’s employment before and after the transfer is taken to be a single period of continuous employment; and
  • the new employer is taken to have been the transferring employee’s sole employer for the entire period.

Therefore, when a business is transferred, an employee’s period of continuous employment with the old employer transfers to the new employer and an employee’s accrued leave (if any) is also transferred.

This means an employer who buys or otherwise acquires a business or part of a business will take on the long service leave obligations for existing employees if there has been a transfer of business. This applies regardless of anything written in a sale of business contract.

What is a transfer of business?

Under the Long Service Leave Act, there is a transfer of business from an old employer to a new employer if the following requirements are satisfied:

  • the employment of an employee of the old employer has ended (e.g. by resignation or termination by the employer);
  • within three months after the employment ends, the employee becomes employed by the new employer;
  • the work (the ‘transferring work’) the employee performs is the same or substantially the same as the work the employee performed for the old employer; and
  • there is a connection between the old employer and the new employer.

Connections between an old and new employer

In broad terms, there will be a connection between the old employer and the new employer if the new employer owns or has the beneficial use of some or all of the assets (whether tangible or intangible) that the old employer owned or had the beneficial use of, and that relate to, or are used in connection with, the transferring work.

Regardless of whether there is a transfer of assets, there will also be a connection between the old employer and the new employer if:

  • the old employer has outsourced work to the new employer, and that work is performed by one or more transferring employees engaged by the new employer; or
  • the new employer previously outsourced work to the old employer, but decides to in-source that work and engages employees of the old employer to continue performing that work; or
  • the new employer is a related body corporate of the old employer when the transferring employee becomes employed by the new employer.

Transfer of employment records

On the transfer of a business, the old employer must transfer copies of all transferring employees’ employment records to the new employer. This will enable the new employer to accurately determine an employee’s long service leave entitlement.

Transmission of business and change of employer before 20 June 2022

The Long Service Leave Act provisions dealing with changes of business ownership changed on 20 June ​2022.

For information relevant to changes of business ownership which occurred on or after 20 June ​2022, see the ‘Transfer of business’ information above.

Pre-20 June 2022 transmission of business provisions

This information is based on the previous transmission of business provisions in the Long Service Leave Act and applies only to changes of business ownership which occurred before 20 June ​2022. 

A transmission of business can occur when one employer sells its business (or part of its business) to another employer. A transmission may also occur in other ways, including by succession or assignment.

If:

  • there has been a transmission of business;
  • a person was an employee of the previous employer at the time of the transmission of business; and
  • the person became an employee of the new employer,

the employee’s period of continuous employment with the new employer will include the period of continuous employment they had with their previous employer.

This means an employer who buys or otherwise acquires a business or part of a business will take on the long service leave obligations for existing employees if there has been a transmission of business. This applies regardless of anything written in a sale of business contract.

An example – 

On 1 January 2017, Sarah bought a small fashion boutique from Alex. One of the staff members, Kim had worked for Alex for 6 years and then worked for Sarah when Sarah bought the business. When Kim resigned on 31 December 2021, she had worked a total of 11 years in the business (6 years for Alex and 5 years for Sarah).  As the business was transmitted from Alex to Sarah in 2021, Sarah was liable to pay all of the long service leave Kim had accrued while working in the business i.e. while working for both Alex and Sarah.

 

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