A requirement to consult with employees or their representatives will generally be imposed only on the old employer, and can derive from:

Applicable industrial instruments, such as an enterprise agreement or modern award; and the Fair Work Act.

Industrial instruments

Modern awards contain a standard consultation clause which requires employers to consult with employees (or their representatives) where the employer intends to ‘make major changes in production, program, organisation, structure or technology that are likely to have significant effects on employees’.

Enterprise agreements must also contain a consultation clause. This is normally in much the same form as the standard modern award provision, and in default of an agreed term, a legislated ‘model consultation term’ is taken to be a term of the agreement.

It can safely be assumed that a proposed transfer of all or part of the old employer’s business would trigger this obligation for purposes both of the standard award clause and the model consultation term.

Specifically, these clauses require the employer to discuss:

• the introduction of the change;
• the effect the change is likely to have on the employees; and
• measures the employer is taking to avert or mitigate the adverse effect of the change on the employees.

Neither the standard consultation clause nor the model consultation term requires the old employer to come to any agreement with the employees or their representatives; all that is required is that there be consultation. On the other hand, failure to consult in accordance with the relevant industrial instrument is unlawful, and can lead to the imposition of substantial civil penalties and to a range of other court orders.

Fair Work Act

Under the Fair Work Act, the old employer is required to notify and consult with relevant employee associations (i.e. unions) if the transfer of business will include the termination of the employment of 15 or more employees of the old employer. In these circumstances, the employer must also notify Centrelink (the Commonwealth Services Delivery Agency) of the proposed terminations. These provisions are little relied upon in practice, but failure to comply is punishable by the imposition of civil penalties and the making of other orders.