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A Reminder to Employers Who Are Selling Their Business

Published 01 Feb 2014

Employers should be aware that when a business is sold, Employees should be informed about their future employment. If employment is to be terminated, the vendor Employer must go through a proper termination process.

If, however, the purchaser of the business wishes to employ existing Employees, they must set up new employment agreements with those people.

Should the Employees not be advised of the intentions, a situation could arise where the Vendor Employer and the Purchasing Employer both having to pay compensation and lost wages to any misled Employees.

In a recent case where it was not made clear to an Employee what would happen to her employment after the sale. Having assisted in stocktaking at the hand over and the day after she was informed by the previous Employer the new Employer did not require her services and she was dismissed. The purchaser subsequently paid for three days work but told her she would not be employed.

She then raised a Personal Grievance against both Employers, the Vendor and the Purchaser. The Authority was of the view that the vendor maintained some sort of employment relationship with the Employee after the transfer of the business took place, and that because the Employee worked after the transfer of the business, the purchaser was also her Employer.

The Authority held that the vendor unjustifiably disadvantaged the Employee ,that the purchaser unjustifiably dismissed her, and that liability should be shared between them. Each Employer was ordered to pay the Employee $3,000 compensation for hurt and humiliation and $3,000 for lost wages.

Employers in a similar situation must keep Employees up to date through a sales process although the party/ies with whom the Employer is negotiating need not be revealed.