Almost all employment agreements will need to have new clauses inserted to comply with the Employment Relations Act about what is to happen if the business is restructured or sold. These clauses have to be inserted even if you have no intention of restructuring or selling up.

Not only must these clauses be included, but it is crucial that every employer get good advice on the wording of the clauses to be included.  We were recently involved with a case where the employer had simply downloaded sample clauses from the internet, without getting professional advice.  Those sample clauses required the employer to guarantee new employment to current staff with any purchaser of the business – a clause which significantly reduced the potential sale price of the business.  It also exposed the employer to a series of expensive personal grievance claims where they were unable to sell the business on those terms.

We strongly recommend employers get tailored specialist advice on the new mandatory clauses.

These clauses must be done:

1. Now for all new agreements, or
2. When existing agreements are amended, or
3. By 1 December 2005 for all other agreements.

By 1 December all agreements must contain the new clauses.

The new clauses cover:

1. Negotiations with the potential employer concerning the impact of restructuring, whether the new employer proposes to offer employment to current employees, on what terms and the starting date, and
2. What happens if employees are not employed by the new employer.

Inserting clauses to cover these points is a mandatory requirement and a failure to do so could result in personal grievance claims, damages or a penalty.

The changes apply to all employees except:

1. Cleaning or food catering staff.
2. Caretaking or laundry staff (education).
3. Orderly staff (health or aged care).

These employees have special protections because they are classified as vulnerable to problems if their employer restructures.  They will usually be entitled to transfer automatically to the new business owner.

All other employees not in the “vulnerable” categories are not entitled to transfer automatically to the new owner if a business is restructured.  However, to comply with the law employers must insert employee protection clauses into all employment agreements.

To simplify and speed up the process for you, and give you comfort that you are properly covered, we can review your contracts and provide clauses for insertion in agreements tailored to your particular circumstances.

We are also able to review all your present arrangements and advise on how best to get fully compliant by 1 December, which is now of course just around the corner.