Who’s the boss now? | ABC Business

Who’s the boss now?

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My five year old daughter often asks me the above question. Although, with her confident tone, it is not really a question. She is the boss.

This article is intended for bosses - or employers, if you prefer that term (not quite as catchy – who’s the employer now?) The context is the sale and purchase of a business.


Duties to employees

Employers will no doubt be mindful of their obligation to consult with employees about proposed decisions likely to have an adverse effect on the continuation of the employee’s employment. That can cause employers some discomfort when selling a business. A vendor will typically not want employees to know about a pending sale of the business until the last possible moment for fear of the unsettling effect.

Employers do not have to disclose confidential information if they have a good reason to withhold it. In practical terms, it is perfectly reasonable for an employer not to consult employees about a pending sale until the sale is unconditional.

To complicate matters, a purchaser may wish to meet the employees prior to confirming the agreement unconditional. The process does require some management.


Redundancy payments

Employment agreements should be reviewed at the time of sale for redundancy clauses. Some redundancy clauses are only triggered if the purchaser does not offer the employee employment on the same terms and conditions. The vendor should try to cover off this point in the agreement for sale and purchase.


Protected classes of employees

Special rules apply to employees doing certain types of work, including catering, cleaning, caretaking, laundry and orderly work where their employer’s business is sold.


Where a business is sold, employees in the specified groups will generally have a right to transfer to the new employer. This is another point that needs to be considered at the time of preparing the agreement for sale and purchase.


Accrued entitlements

Employees accrue holiday and other entitlements over the term of their employment. These need to be dealt with appropriately on the sale of a business.


There are two ways of dealing with such accrued entitlements. One way would be for the vendor to pay out all entitlements to employees. The employees then start afresh with the purchaser. This approach has the advantage of being “clean”.


The alternative is for the purchaser to assume the accrued entitlements, so that employees can take their accrued annual holiday in the ordinary course. In this situation, the parties will deduct the amount of employee entitlements assumed by the purchaser from the purchase price. That can provide a cash flow advantage for the purchaser. It is also usually better for employees, as they are not forced to take a payout in lieu of their entitlements. Employees would need to sign a letter acknowledging that the obligation to meet the entitlements had passed to the purchaser.


If you are unclear about your legal responsibilities in relation to employees, then it would be prudent to seek professional advice.


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