KEY POINTS:
Q: My employer is currently selling a division of the company, which includes the assets and legal entities, but not the staff. The company policy for salaried staff redundancy includes the following exclusions:
Employees are not eligible for a redundancy payment if: "The Company transfers or sells the business, or part of it, to a new employer and the new employer offers the employee a position on substantially similar terms of employment."
It has been said that staff who are employed by the new owner will have to sign new contracts. At what point would differences between the old employer's contracts and the new contracts kick in the redundancy provision (ie not similar terms)? What are examples of 'not' substantially similar terms, and does that include loss of years of service entitlements?
Examples of probable differences include:
* Loss of years of service entitlements (including redundancy entitlements).
* The old employer provided work required vehicles whilst the new employer will require staff to purchase their own work required vehicle.
* Reduction to salary and leave entitlements (including long service leave).
A: Many employees find the situation you are in perplexing because there is no 'magic formula' for determining these situations. If your employer is talking about selling its business but promises you a job with the purchaser, this can at first seem like good news. But discovering differences between the new job and your current job can cause you to ask whether your employer is just promising you a new job to avoid paying redundancy compensation.
Generally, the test for whether a new position creates a redundancy is this: Would a reasonable person, taking into account the nature, terms and conditions of the new position and the characteristics of the employer, consider there was sufficient different to 'break the essential continuity of the employer'. The answer to the question is often not obvious because it depends on the particular situation.
In your particular situation, your employment agreement says your employer can avoid paying you redundancy compensation if the new job involves 'substantially similar terms of employment' to your current one. So the new position could conceivably be less favourable than your current one, so long as it is 'substantially similar'.
Just how less favourable could the terms of the new job be, before they are no longer 'substantially similar?' 'Substantially similar' means more than 'reasonably compatible'.
As examples of substantially similar jobs, a job with the same duties but a different title is likely to be 'substantially similar'. A new job that is the same but with a different 'focus or emphasis' is likely to be substantially similar.
As to jobs that are not 'substantially similar', there is no set rule about the amount of difference required for this. Each situation depends on its facts. The nature and extent of each difference is relevant. All differences could be relevant including these ones:
Different responsibilities.
* Change in seniority - is this a demotion?
* Changes to salary and other benefits
* Reduced or increased hours of work
* Different type of employment e.g. fixed term instead of permanent.
* Introduction of a restraint of trade clause
* Reduced leave entitlements.
* Reduced/removed redundancy compensation
* Failure to recognise prior service
In your case, if all the examples you give of probable differences existed between your current job and the new job, this is likely to mean the new job is not 'substantially similar'.
If only one or some examples you gave were present, the question is more difficult to determine because it depends on the nature and extent of the differences. If you think the new job is not substantially similar, you should consult an employment law specialist and fully explain the nature of your current job and the new terms offered so the differences can be assessed.
