Are you poised to purchase your first franchise business and about to hire staff? The experience can be quite daunting if this is a new situation for you. You may be vaguely aware of employment laws “out there” but not entirely sure what they are. In this article, we examine the common pitfalls experienced by new employers.
Employing staff
When purchasing an existing business, you will likely have access to a pool of existing employees to recruit. In most cases, if any existing employee accepts employment with your business, they become a “transferring employee” under the law.
Do not feel obliged to offer employment to all existing employees of the vendor. Rather, take the time to interview each employee and select those of whom you think will fit best into the business. Ensure, however, that your decision not to employ is not based on any discriminatory factors (e.g. age, gender, carer’s responsibilities etc.).
It is important to know that if you employ transferring employees, you must recognise their continuous service with the vendor for the purposes of unused personal leave and long service leave.
For example:
In Victoria, employees become entitled to pro-rata long service leave after seven years of continuous service. If, at the time of the transfer of employment from the vendor to your business, the employee had reached six years’ service, you will bear the entire liability for long service leave after a year. Furthermore, if the employee had 30 days of unused personal leave accrued with the vendor, they can take all 30 days of paid personal leave whilst under your employment.
If a modern award or enterprise agreement applied to a transferring employee before a transfer of employment and you employ the transferring employee to carry out the same work, the same modern award or enterprise agreement will continue to apply to the transferring employee after the transfer.
A transferring employee will also continue to be covered by the relevant industrial instrument which applied to them.
For the above reasons, it pays to do some homework before you decide to offer employment to existing employees, particularly information about the employees’ service periods. Adjustments for personal and long service leave liabilities should be made during a sale of business process to ensure that they are fairly shared with the vendor.
If you do offer employment to an existing employee, we further recommend that you provide a written letter of offer confirming whether you will recognise their services with the previous employer for the following purposes including:
- Annual leave;
- Redundancy pay;
- Eligibility for unpaid parental leave;
- Eligibility to request for a flexible workplace arrangement; and
- Eligibility for unfair dismissal remedies.
The last point is particularly important. Ordinarily, an employee would have to work at least six months with an employer (or 12 months with a small business employer) before becoming eligible for unfair dismissal remedies.
If you do not wish for transferring employees to have access to unfair dismissal remedies from day one of their employment with you, the letter of offer should expressly state that the employee’s “continuous service with the previous employer will not be recognised for the purposes of unfair dismissal remedies”.
Finally, always provide new employees with a copy of the Fair Work Information Statement.
During employment
During employment, you must ensure that your employees receive all of their legal entitlements which are set out in:
- The Fair Work Act 2009 (Cth), which contains the 10 National Employment Standards.
- Any industrial instruments such as a modern award or registered workplace agreement, which typically sets out minimum rates of pay, shift penalty loadings, overtime pay entitlements, allowances and other terms of employment.
- Their common law agreement (e.g. individual letter of offer or formal employment contract).
- The employer’s internal policies and procedures.
The above list is arranged in order of priority. For example, the terms of a common law agreement cannot be inconsistent with a relevant industrial instrument or the Fair Work Act 2009 (Cth). Some employers mistakenly believe that they are not in breach of the law because their employees had signed a contract (i.e. a common law contract) accepting reduced entitlements.
This leads to possible underpayment of wages, staff complaints and civil proceedings commenced by the Fair Work Ombudsman on behalf of staff.
Ending employment
There are many laws that protect employees relating to termination of employment and this article does not attempt to list all of the possible claims that could be made against a former employer.
There should always be a valid reason behind any termination of employment. Usually, the reason for termination could be related to performance, misconduct, ability to carry out the inherent requirements of the role, or redundancy.
There are legal requirements surrounding terminating employment. They include:
- The need to provide minimum periods of notice to the employee (or payment in lieu of notice);
- The need to provide a written letter of termination; and
- To pay the correct final pay amount and provide a payslip detailing the breakdown.
Grievances and complaints relating to pay entitlements often lie dormant until termination time. We recommend that you obtain legal advice before dismissing any employee if there are any doubts about whether a complaint could arise.
- As the Workplace Relations advisor for multiple franchise networks, MST Lawyers is able to provide reliable and no nonsense legal advice on anything relating to employment issues.