When a new owner takes over a business, at what point is he considered to have ’employed’ the existing staff?
In a recent case before the Fair Work Commission, a café in Melbourne was taken over by a new owner, SK, on 10 September 2012. No information was given about future employment conditions but the manager encouraged staff to be patient and understanding with the new owners. There was no new paperwork in respect to employment, no change to shifts, no change to wages, and no request for taxation declarations.
Annual leave entitlements were paid out at the time of the transfer of business.
At that time, one of the workers, B, had been employed on a permanent part-time basis for more than 12 months. He continued working on the usual basis until 22 September, when he received a text message from SK which read: ‘Hi B, it is S, I just want to tell u that I’m not happy to have u with our staff members anymore, I will contact u very soon for ur wages.’
Unfair dismissal proceedings were commenced by B against SK even though B had only been employed by SK for about two weeks.
During the proceedings, SK submitted that he felt a need to reduce the number of employees and observed their performance over a two-week period to choose who should stay and who should go. He said that after watching the workers he ‘didn’t select B for my staff’.
SK added: ‘I didn’t dismiss him, for he was not my employee, I simply chose not to select him for my business.’
Employed ‘before and after’
The Fair Work Commission found that B was employed in the business before the transfer and after the transfer.
The Commission determined that because B had not been informed in writing that the period of service with the old employer would not be recognised, the period of service with the first employer counts towards the period of continuous service.
Accordingly, the Commission found that B did in fact have more than 12 months of continuous service and was protected from unfair dismissal.
The Employment Law team at Everingham Solomons is well equipped to assist you with all your workplace relations issues because Helping You is Our Business.
Click here for more information on Jessica Simmonds.
Most people will probably be aware of the changes to superannuation guarantee contributions but what do these changes mean for employers?
All employers need to be aware that the changes to the superannuation regime will increase employers’ superannuation obligations. Starting from 1 July 2013 the compulsory contributions rate will increase from 9% to 9.25%.
Superannuation regime
The changes introduced by way of the Superannuation Guarantee (Administration) Amendment Act 2012 means that compulsory superannuation guarantee contributions will increase over a seven year period, from the current rate of 9% to 12%.
The increases will be gradual, as follows:
Income year Charge percentage
Starting 1 July 2013-2014 9.25%
Starting 1 July 2014-2015 9.5%
Starting 1 July 2015-2016 10%
Starting 1 July 2016-2017 10.5%
Starting 1 July 2017-2018 11%
Starting 1 July 2018-2019 11.5%
Starting 1 July 2019-2020 12%
Removal of the Upper Age Limit
The Act also has an impact for employers when it comes to paying superannuation guarantee contributions to employees over the age of 70. Currently, employers are not obliged to make payments in respect of employees who are age 70 and over. However, from 1 July 2013 employers will be obliged to make superannuation contributions for all their employees. The changes will also ensure that employers will be able to claim income tax deductions for superannuation guarantee contributions made to employees aged 70 and over from 1 July 2013.
The Employment Law team at Everingham Solomons is well equipped to assist you with all your workplace relations issues because Helping You is Our Business.
Click here for more information on Jessica Simmonds.
When GST was introduced in 2000, part of the then agreement between the Commonwealth and the States for the sharing of GST revenues proposed the abolition of various state taxes relevant to business.
As might have been anticipated, most State Governments including NSW have not been particularly prompt in doing that. Finally, there is good news the business on this front.
Effective 1 July 2013 NSW stamp duty on –
Purchase of shares in private companies;
Mortgages; and
Purchase of business assets other than land,
is to be abolished.
The abolition of these duties was originally proposed to take effect from 1 July last year however that was deferred in the 2012 State Budget to this year. Most experts are waiting on this year’s State Budget, scheduled to be released on 18 June, before relying upon the proposed changes taking effect.
Traditionally June is a peak activity month for business sales and purchases. This year however the “carrot” of reduced or eliminated stamp duty and the uncertainty until after the State Budget may recommend that some business transactions be deferred into the new financial year.
There are anti-avoidance provisions already in the stamp duty legislation to stop the exemption applying to transactions which finalise after 1 July but result from legally enforceable arrangements entered into before that time. This means that there is limited scope to put a legally binding deal in place before 30 June and then claim the benefit of the stamp duty exemption if settlement takes place after 1 July.
This will be one of the issues that vendors and purchasers will need to grapple with in the period leading up to the end of the financial year. Sellers will naturally wish to complete transactions whereas some purchasers may wish to defer until the new financial year.
At Everingham Solomons the business law team has the experience and expertise to provide advice on all sale and purchase of business matters and associated stamp duty issues because Helping You is Our Business.
National Buildplan was a construction company involved in arranging construction of many large building contracts throughout Australia. A large number of those projects are Government funded infrastructure jobs, many of which are in the north west of New South Wales.
National Buildplan went into administration on 8 April 2013 and more than likely will end up in liquidation.
The collapse has left local contractors out of pocket for many millions of dollars.
We are yet to see the full effects of the insolvency which will involve contractors retrenching staff, contractors unable to pay their own debts resulting in further retrenchments and the closure of contractors’ businesses, some of which have already closed.
After the collapse of a number of high profile construction companies, the New South Wales Government commissioned the Collins Report last year.
The key recommendation was the establishment of a Statutory Construction Trust for projects greater than $1 million. The idea was that the Statutory Trust would receive the progress payments from the principal and the trustee would pay the sub-contractors direct.
Sadly the recommendations of the report have not been implemented however it is hoped that the anguish that our local contractors and employees are now suffering will motivate the Government into taking swift action to reform the building and construction industry.
I also ask, how long has the Government, which includes the Government departments who are administering contracts such as Health Infrastructure and Public Works, known that National Buildplan was in financial trouble?
There is evidence to suggest that various Government departments were well aware of the potential insolvency a number of weeks ago having met the company to discuss these issues.
Further anecdotal evidence suggests that National Buildplan were rejected as a potential tenderer for a large Government infrastructure job more than two months ago based on its perceived risky financial position.
What did the Government think when sub-contractors walked off the Nepean Hospital job on two separate occasions based on non payment.
Surely the Government should have taken notice and immediately reviewed the financial position of the head contractor and taken action to protect the sub-contractor’s payments. After all, it was the Government who commissioned the Collins Report .They were fully aware of the risk that a subcontractors takes in such contracts.
Is the Government not required, prior to the tender and during the construction process to monitor the financial health of its head contractors? Was this done?
It is time for the sub-contractors, their workers and families to take a stand on this issue and seek a Government rescue package for the sub-contractors who are left stranded and to change the laws to prevent this situation happening again.
At Everingham Solomons we have the legal expertise to help with all your legal problems because Helping You is Our Business.
Good faith clauses are finding their way into more and more commercial contracts. Traditionalists amongst lawyers will tell you that they are meaningless and that the only provisions which belong in a contract are precise statements of what each party must do, at what price, when and what happens if they don’t do what they are supposed to. Warm and fuzzy motherhood statements, they say, do not belong in contract documents, which should be bullet proof.
But good faith clauses are fighting back. Late in 2010, the New South Wales Court of Appeal decided a case involving a heads of agreement between Macquarie International Health Clinic Pty Limited and Sydney South West Area Health Service, relating to the development by Macquarie of a private hospital and a car park on Royal Prince Alfred Hospital land, which required the parties to act with the utmost good faith to one another.
After the agreement was signed, Area Health created a strategic plan which did not propose any development consistent with the agreement with Macquarie. Area Health never mentioned this to Macquarie and was nailed under the good faith clause because disclosure would have made a substantial difference to Macquarie’s expectations under the heads of agreement.
The Court said that the good faith promise must be construed having regard to the terms of the contract and the circumstances known to the parties in which it was entered into. It said that a contractual obligation of good faith embraces an obligation on the parties to cooperate in achieving the contractual objects, compliance with honest standards of conduct, and compliance with standards of conduct that are reasonable having regard to the interests of the parties. It said that a contractual obligation of good faith does not require a party to act in the interest of the other party or to subordinate its own legitimate interest to the interest of the other party but it does require it to have due regard to the legitimate interests of both parties.
So, parties entering heads of agreement, letters of intent, memorandum of understanding or formal contractual documents should be careful about good faith clauses. If you require advice in relation to the negotiation or preparation of contract documents, the commercial team at Everingham Solomons can assist you because Helping You is Our Business.
In business deals, sometimes one party just won’t pay up.
As a creditor (person who is owed money) one option that is available is to pursue the debtor (person who owes the money) through the court system for payment.
Unfortunately however, sometimes debtors don’t respond to court proceedings. The issuing of a statement of claim, entering of judgment and enforcing of an order can be a long, and cumbersome exercise. The debtor gets to keep your money in his pocket for months while you jump through the hoops.
If, however, the party that owes you money is a corporation, there is another very, very effective alternative available to you.
It is called the statutory demand and it works like this:
You send a simple and inexpensive document requesting payment to the debtor company. If the debtor company does not pay the debt within 21 days, the company can be almost immediately wound up – The company’s life is over. Trading stops, an administrator is appointed and all the company’s assets are sold off to pay you.
If the debtor company has even a half serious business they will not want this to happen. It’s not a good outcome for it’s business.
Of course, the debtor company can always object to the statutory demand by refuting the legitimacy of the debt. But, they have a very strict 21 day deadline in which they are entitled to do so. They will also have to pay a filing fee of about $2,500 to give a Supreme Court Judge the pleasure of listening to their argument.
It’s the perfect medicine to wake up a sleepy debtor that will not respond to any other prodding for payment.
If the creditor’s entitlement to the debt is straightforward, it will be futile and incredibly expensive for the company to resist. A smart debtor will simply pay up rather than being wound up.
A statutory demand is a simple document but must be drafted meticulously. It must be verified, sworn and served in accordance with complicated Corporations Rules.
If a statutory demand contains any defect it can be set aside by the court and the creditor can be ordered to pay for the debtor’s inconvenience.
In order to make sure your statutory demand is done correctly the first time, contact Everingham Solomons, because Helping You is Our Business.
Independent contractors are usually self-employed and accordingly are their own boss – providing their own tools, deciding which jobs to take on, being paid to achieve a result and bearing the risk of non-payment.
Employees on the other hand are paid to work certain hours for an agreed wage, and are usually entitled to paid leave.
A common distinction between contractors and employees is the documentation used to engage the worker – an employee will usually be provided with an employment agreement for ongoing services; an independent contractor will usually enter into a contract specifying the nature of the work to be carried out during a particular period. The difference is sometimes small and it can be difficult to ascertain whether a person is a contractor or employee.
Whilst a difficult distinction, contractor versus employee is an important one for businesses to make.
A recent Federal Court case has held that signing contracts indicating an independent contractor relationship is not sufficient to shirk responsibility if the real nature of the relationship is that of employer/employee.
The case involved a number of insurance sales representatives who signed contracts to provide independent contractor services. The sales representatives however were trained by the insurance company, supervised and directed by the insurance company, and worked closely with the insurance company. The Court held that the insurance company’s ability to control the sales representatives placed them into the category of employee rather than contractor. The decision resulted in more than $500,000 in accrued annual and long service leave being paid to the insurance representatives by the company.
To avoid a costly claim for back pay or other entitlements such as superannuation or long service leave, contact the employment law team at Everingham Solomons where Helping You is Our Business.
Click here for more information on Rebecca Greenland.
In April 2011, the founder of a substantial property development group was convicted of dishonestly using his position as a director of companies in the group to obtain an advantage for himself to the tune of about $2.8million. He was sentenced to a term of imprisonment of three and a half years. Last year, the NSW Court of Criminal Appeal affirmed the conviction.
The director in question used his position as a director to sign some cheques from one company in the group to another, which then paid him personally an amount, which was wrongly characterized in the books as “commission andmanagement fee” for introducing two properties to the group that were available for acquisition. The truth of the matter was that the director had made no such introduction. The truth was that the payments were distributions to the director of unrealised capital profits thought by the director to have accrued but not the subject of any formal valuation or accounting entries.
At the time that the payments were made, the group was profitable, the companies were solvent, and the payments had the approval of the sole shareholder (the director) and had been disclosed to the chief financial officer. Moreover, the payments did not directly disadvantage any third party and the director had obtained advice from Price Waterhouse Coopers in relation to the payments and how they should be recorded in the books of the company.
The director said that he had been engaged on a full time basis with the group for over two years. He had made an initial investment of about $750,000 and had raised a considerable amount of money. He had not received any return nor paid himself any wages. He said that the payments, which were made to him were “fair” in those circumstances.
None of that was an answer to the prosecution’s case. All that was important was that the manner of payment to a related party of the group’s funds was not truthfully recorded in the group’s books of account.
So, it is of critical importance that directors of companies discharge their duties as directors with complete honesty. If you need help with matters of corporate governance, the commercial law team at Everingham Solomons would be happy to help because Helping You is Our Business.
The Retail Leases Act (NSW) applies to all retail leases in NSW. The definition of retail lease encompasses any agreement under which a person grants another person a right to occupy a premises for the purpose of using the premises as a retail shop.
At it’s core, the Retail Leases Act is a piece of consumer protection legislation for small business . It is designed to address perceived imbalances in power that may exist between landlords and small business tenants.
As well as regulating particular terms of retail leases, the Act emphasizes the fundamental importance of disclosure before a retail lease is entered into.
Under the Act, it is illegal for a landlord to advertise property for a proposed retail use without first having:-
A draft lease prepared; and
both the draft lease and of any applicable retail tenancy guide ready to provide to prospective tenants.
Failure to meet these disclosure obligations will not only delay a transaction when a tenant is found, it will in fact constitute a breach of the Retail Leases Act, potentially resulting in liability for both landlords and their leasing agents. The current penalty imposed under the Act can be up to $5,500.
Failure to fulfill disclosure obligations can be both costly and time consuming for landlords and their agents.
At Everingham Solomons we have the expertise to assist both landlords and tenants in regards to the above disclosure issues, as well as any other retail lease concerns.
If you have any questions regarding retail leases, please do not hesitate to contact the experienced team at Everingham Solomons because Helping You is Our Business.
<Last week we looked at a landlords rights under a commercial lease where the tenant left the property and stopped making rental payments mid way through a lease.
Our firm brought the matter before the Tamworth Local Court before the lease term expired.
In short there were three periods in which the court had to consider the landlord’s right to damages under the lease. To recap they were as follows:
the time between the tenant ceasing to make rental payments and surrendering the keys;
the time between the tenant surrendering the keys and the date the matter was brought before the court; and
the time between the court date and the end of the lease which was not due to expire for a further six months.
In the first period, the tenant simply owes the landlord the rent not paid, as discussed last week.
In regard to the second period, the landlord could recover the unpaid rent because he was entitled to be compensated as though the contract had been completed without default. During this period however, the landlord needed to show that he had taken reasonable steps to mitigate his loss. This meant demonstrating that steps had been taken to encourage other tenants to lease the empty premises.
The third period is legally tricky. For that period, the court could not be sure that the landlord would continue to advertise the property or that the premises would remain empty.
There is no NSW case law on the point. We researched and relied on a Western Australian case of Luxer Holdings v Glentham which stated that:
Where the matter is decided in court before the term of the lease expired, the normal damages are the total rent that would otherwise have been paid, less any amount the landlord has, or is likely to obtain, as profits from the use of the premises until the date the lease would have otherwise expired.”
We were able to prove that the landlord had taken all possible steps to mitigate its loss up to the date of the court hearing and that it was unlikely that the landlord would obtain any profit from the premises between the date of the court hearing and the expiry of the lease.
Our client was awarded the full value of the rent that he would have been paid had the tenant stayed in place until the end of the lease.
Should you wish to discuss any aspect of commercial leasing please contact Everingham Solomons, because Helping You is Our Business.
When a new owner takes over a business, at what point is he considered to have ’employed’ the existing staff?
