What happen to years of service if you sack an employees that is carried from the a business purchased?

Sales of Company’s Assets and Business: What Happen if the Buyer Offers Continuous Employment to the Employees?

In a situation where one company sells its assets and business to another company, often the questions that will subsequently follow will be along these lines – What about the employees? What should we do with the exisiting workforce? Some companies that buy over the assets and business of another companies might decide to offer continuous employment to the existing employees in the companies whose assets and business are being bought over. Generally, this depends on individual arrangements and agreements between the companies involved.

Now, what happen if the new company offers continuous employment and an employee accepts the offer? Will the employee’s years of service in the older company (previous employer) be taken into account or will the years of service start from zero (0) again with the new company? Will this affect computation of monetary benefits that the employee might be entitled to in the future with the new employer?

In a recent judgment of the Federal Court dated 15 August 2012, between Dynacraft Industries Sdn Bhd v Kamaruddin Bin Kana Mohd Shariff & 6 Ors, the same questions were contemplated. In this case, the assets and business of Dynacraft Sdn Bhd (DSB) were sold to Malaysia Pacific Industries Berhad (MPI) but transferred to its subsidiary, Dynacraft Industries Sdn Bhd (DISB). Employees of DSB ceased their employment with DSB on 19.1.1996. On the same day, DISB made offers of continuous employment to all employees of DSB. Some of them accepted the offer, including the 7 employees in this case. So, they continued to work with DISB.

However, because of the worldwide economic downturn in 1998, DISB was facing financial difficulties and had to undergo reorganisation and rationalisation exercise. This resulted in a number of positions becoming redundant. The 7 employees who used to work under DSB and had then accepted the offer of continuous employment with DISB were among the employees considered redundant. They were subsequently retrenched from their employment with DISB.

In the retrenchment process, DISB did not take into account the years of service the 7 employees spent with their old employer. The 7 employees filed a claim for reinstatement under section 20 of the Industrial Relations Act 1967.

Read the RULING outcome HERE

Source: A blog by Dymphna Lanjuran of Messrs Foong Cheng Leong & Co

Posted by Alex Wong CPA Australia Melbourne University, Australia

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