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Long service leave: change of employer

Understand the rules and get the long service leave calculations right

On this page

  • Understand the definition of 'one employer'
  • Know how 'one employer' applies under different circumstances
  • Read our examples to help you understand the rules

One employer and LSL

The Long Service Leave (LSL) Act sets out several situations where an employee is regarded as having been employed by one employer – even though in the strict legal sense they've worked for more than one employer.  

For the purposes of calculating long service leave, we've listed the different scenarios below that are considered as 'one employer'  .

Sale or transfer of business

  • Where a business is sold, transferred or assigned, and an employee remains with the business, the new employer becomes responsible for the employee's long service leave entitlement. 
  • The period of employment with the old employer transfers to the new employer, who becomes liable for the long service leave accrued across the entire period of employment. 
  • It is common for the sale of business documents to reflect this liability – but such documents could not validly deny an employee's entitlement. 
  • Even if there are no documents setting out this liability or even if the documents expressly say the new employer is no liable, the employee still has an entitlement – and the new employer is liable. It is important to note that, where an employee will continue with the new owner of the business, the old employer should not pay out accrued long service leave to the employee. 
  • It is common for employees to be paid out any accrued annual leave at the time of a sale of a business, and for their employment to be considered terminated with the old owner – however this does not break continuing employment for long service leave according to the LSL Act.
  • If an employee is dismissed by the old or new business owner but is re-hired by the new business owner within 3 months, employment is not broken for purposes of the LSL Act.
  • If an employee does not remain with a business that has changed hands, the employer who sold the business is responsible for calculating and paying out any long service leave entitlements to which the employee has become entitled.

See our example outlined below.

Employee records 

  • As the new owner of a business becomes automatically responsible for the service with the first owner, it is important that the new owner receives all employee records relating to long service leave from the first owner – this will ensure the new owner is aware of the long service leave entitlements of any continuing employees.
  • Not having records from the first owner is not an excuse for the new owner to avoid paying long service leave to any continuing employees who are entitled to it – in fact, the new owner may be in breach of the records provisions of the LSL Act if they fail to maintain records for their employees' full length of service, even where a part of that service was with a previous owner of the business.
  • Such a breach of the LSL Act amounts to a criminal offence and the employer may be liable to a penalty (fine) and a criminal conviction. 

Use our template below to keep proper records of your employees long service leave.

Long Service Leave Record (DOC 32 KB)DOC icon

Related employer

  • Where an employee has worked first with one employer and later works with a related corporation, or a corporation with substantially the same directors and/or management, then employment will be recognised as continuous. 
  • In such a case, the related corporation will assume liability for the employee's long service leave entitlement from the time when the employee commenced with the previous employer(s).

Apprentices

  • If an employer has an apprentice who is employed by the same employer within 12 months after completion of that apprenticeship – then the time of their apprenticeship is counted for the period of employment with that employer.
  • Some apprentices are employed by a Group Training company which places the apprentice with a host employer. The apprentice may later become employed by the host employer directly. In this situation, the employment is likely to be with two employers (first the Group Training company, later the business) who are not related. The time the apprentice has spent employed with the Group Training Company will only be considered continuous employment, where the Group Training Company and the host employer are related in a way prescribed in the LSL Act.

Multiple locations

  • Some employees may work in a variety of locations over a period of years. As long service leave entitlements vary between States, the question then arises as to which long service leave legislation applies to the continuous employment – the answer will always turn on the particular circumstances of the case so you should seek advice about your particular circumstances in this situation.
  • Overseas service is likely to be included for the purposes of accruing long service leave, if it's part of continuous employment with one employer.

Transfer of assets

  • There are occasions where a business' assets are transferred to another business – even where the business itself has not been sold. A transfer of assets may occur in a variety of circumstances, such as: 
    • where one business had a tender to operate a facility – for example a car park, shopping centre or government service – and loses that tender
    • where a retail business or facility is closed rather than sold – but the assets within that business or facility are transferred to another person or business, which then employs the employees of the previous business.
    • where a business may close-down rather than be sold, but its assets are transferred to another employer
  • A common example of the above situation is where a business goes into liquidation and the liquidators sell the former business' assets to a new business – with that new business picking up the employees of the former (liquidated) entity. 
  • Some businesses believe that all accrued employee entitlements (including LSL) are covered by the Fair Entitlements Guarantee (FEG) in the case or liquidation. However, where the LSL Act applies, FEG does not cover long service leave entitlements where there has been a transfer of assets from a liquidated entity to a new business where the new business employs the employees within 3 months of the termination of their employment with the liquidated entity.
  • Under 60(6)-(8) of the LSL Act, new businesses to which assets are transferred adopt the long service leave liability for any employees whom they employ within 3 months of the termination of their employment by the previous employer. This occurs where the employees are employed by a new business to continue to perform duties in connection with any of the transferred assets formerly used in the carrying on of the old business (in this example, the liquidated business), or in relation to other assets s of a similar kind.

 See our example outlined below.

Long service leave record

  • As the new owner of a business becomes automatically responsible for the service of employees of the first owner, it's important that the new owner receives all employee records relating to long service leave from the first owner. 
  • Receiving all employee records relating to long service leave will ensure that the new owner is aware of the long service leave entitlements of any continuing employees. 
  • Not having records from the first owner is not an excuse for the new owner to avoid paying long service leave to any continuing employees who are entitled to it. 
  • A breach of record keeping requirements under the LSL Act amounts to a criminal offence and the employer may be liable to a penalty (fine) and a criminal conviction.

Examples

Robyn's employer sells the business

Robyn has been continuously employed by John's Tyres for 9 years. The owner of John's Tyres sells the business to Terry. When the business is taken over, Terry continues to employ Robyn – and there is no break in service. In this situation, Robyn's employment is continuous.

Terry becomes liable for Robyn's accrued long service leave over the past nine years, and for any long service leave that accrues in future.

A hotel goes into liquidation – and sells its assets

Company A is a hotel. It goes into liquidation and the liquidators only sell the assets – such as hotel room furniture, linen, and computers to Company B.

Company B begins to operate the hotel as a new concern, and employs the employees who worked for Company A within 4 months of the date their employment ended with Company A.

Under Section 60(6)-(8) of the LSL Act, new businesses to which assets are transferred from an existing business adopt the long service leave liability for any employees whom they employ within 3 months of the termination of their employment by the previous employer – even where the previous employer was in liquidation. 

So in this instance, Company B must recognise the continuing employment of the employees from when they first started with Company A,as a result of he transfer of assets from Company A to Company B.

If you own, are looking to purchase, or start a small business with under 20 employees, you may be eligible for our Long Service Leave Small Business Information Service (LSLSBIS).

LSLSBIS offers one-on-one information and advice regarding your responsibilities under the Victoria Long Service Leave Act.

To access this program, contact the Employment Information and Compliance Unit by giving them a call on 1800 287 287 or send them an email.

Need further assistance?

Looking for further assistance and advice about long service leave? Give Employment Information and Compliance a call on 1800 287 287.

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