No Transfer “Arrangement” When Pub Changed Hands

John Lucas Hotel Management Services T/A World Square Pub v Ms Vanessa Hillie [2013] FWCFB 1198 (22 February 2013)

What to do about employee entitlements when a business changes hands is often tricky, as a recent full bench of the Fair Work Commission appeal decision shows. The issue at stake here was the length of service for an employee who had worked for the ‘old employer’ and now continued to work in the same hotel, for a new employer.

The trouble was, the new employer had no direct connection with the ‘old employer’. The owner of the hotel had invited the new employer to take up the licence and try to revive the business. The law on transfer of business, or succession/transmission of business as it used to be called, is set out in the Fair Work Act and requires there to be some connection between the “old” and “new” employers.

The law is very broad, and the connection can be quite tenuous, as this case highlighted. In the original case, the Commissioner found that there had been an “arrangement” between the old employer and the new employer, so this was enough to justify a continuity of service for the employee and therefore access to unfair dismissal rights based on that length of service. But the old and new employers had only met to discuss matters and there was no undertaking or intimation or suggestion from the new employer that could genuinely meet the meaning of an “arrangement”. There really was no relationship between the two employers.

The full bench identified this as the first important point to consider and then identified that while there were some discussions and a meeting between the old and new employers, these did not amount to an ‘arrangement’ as that term is used in the Act. The employee had a fresh start with the new employer, so her length of service did not include her time with the ‘old’ employer despite the fact that she worked in the same job in the same hotel.