Worker believed employment continued but acquiring company never offered contract
The Fair Work Commission recently dismissed an unfair dismissal application involving a clinic manager who claimed employment with a new franchise owner following a rushed business sale.
The case arose when the worker attended and performed duties during the transition period but was never formally employed by the acquiring company, leading to disputes over whether an employment relationship existed during the brief overlap period.
The worker argued she had been employed by the new franchise owner after her original employer's business was sold, maintaining that her continued work performance and unchanged duties demonstrated an ongoing employment relationship.
She contended that working under new systems, in the presence of new management, and generating revenue for the business established employment with the acquiring entity.
The franchise buyer contested the employment claim, arguing no contract or mutual intention to create an employment relationship existed. The company maintained that its temporary operational control during the transition was purely to preserve business continuity, with formal legal ownership only occurring after the worker had ceased attending the premises.
Financial distress triggers urgent franchise transfer
The employment dispute stemmed from the rushed sale of a cosmetic procedures franchise due to the original franchisee's financial distress.
The original company, which had employed the clinic manager since July 2022, found itself in potential insolvency and required urgent assistance to find a buyer to ensure business continuity.
The franchisor approached the eventual purchaser in January 2025 to urgently acquire the clinic, with the buyer already operating other franchise locations.
The acquiring company agreed to step in to prevent business closure and maintain operations in the major shopping centre location.
The contract of sale specifically required the original employer to terminate all employees and satisfy all associated liabilities as part of the transaction terms.
This clause was designed to ensure clean separation between the old and new ownership, though its implementation proved problematic during the rushed transition process.
Transition period creates employment uncertainty
The urgency of the transaction led to confusing circumstances for affected employees. On Friday, 31 January 2025, the worker received a message from her original employer stating all wages and entitlements had been paid and expressing appreciation for support during the transition period.
The following day, she received an email advising that the business had been sold, effective immediately and that she would be placed on secondment to the new owner for up to four weeks.
The email explicitly stated that secondment did not create any employment relationship with the new company and did not guarantee continued employment following the secondment period.
However, the worker never signed the proposed secondment agreement as she wanted to obtain legal advice first. Meanwhile, the new owner installed payment terminals at the clinic on 1 February, though revenue remained quarantined for the original owner, and keys to the premises were handed over that same day.
Worker attends despite unclear employment status
On Monday, 3 February 2025, the worker attended and performed her usual duties from normal hours until 5:30 PM, despite the uncertainty surrounding her employment status.
The new owner's evidence indicated he had not scheduled her to work and that rosters were still being managed by the original employer using their legacy system.
During the afternoon, the new owner visited the clinic for the first time, briefly meeting the worker with a handshake and a brief greeting lasting approximately 20 seconds.
At this point, the acquiring company was not yet the legal franchisee as the contract of sale had not been signed, though the original employer had effectively exited the business.
The contract was eventually signed at 4:01 PM by the original owner and at 4:51 PM by the purchaser on 3 February 2025. This timing became crucial as the worker continued performing duties until 5:30 PM, raising questions about whether work performed after the legal settlement created employment obligations.
Communication failures compound confusion
At 7:12 PM on 3 February 2025, the worker received an email from the new owner stating that the original employer had made the decision to terminate her contract effective immediately.
The original employer denied instructing this communication and maintained the business had changed hands on 31 January, though this was legally incorrect.
The following day, the new owner sent a clarifying email confirming that she had not been employed by the acquiring company and that no employment relationship existed.
The new owner's evidence indicated this was sent because he wanted clarity, given the rushed transaction and his deliberate decision not to employ the worker.
These conflicting communications exemplified the poor handling of the transition, with the Commission noting that the transition took place without proper regard to employees and was confusing, distressing and very difficult for affected workers.
Legal ownership timing proves decisive
The Commission's analysis focused heavily on the timing of legal ownership transfer relative to the worker's attendance. Under the contract terms, because the agreement was signed after 3:00 PM with no written alteration, legal settlement occurred on the next business day, 4 February 2025.
This meant the worker's duties on 3 February occurred before the acquiring company legally owned the business, despite her working until 5:30 PM, while the contract was signed at 4:51 PM.
The Commission found that ownership of the franchise did not change until 4 February 2025, after the worker had ceased working.
The tribunal noted that while various practical steps occurred, including key handover and system installation, these happened as a matter of necessity but without ownership of the business having changed.
The new owner's involvement was characterized as temporary operational control to preserve business continuity rather than formal employment obligations.
Employment relationship requirements not satisfied
The Commission applied fundamental contract formation principles, finding that the necessary preconditions for mutual intention to create legal relations, offer and acceptance, and consideration were absent. The new owner's evidence clearly established no intention to employ the worker.
The Commission noted that while intention can be inferred from conduct, no conduct objectively demonstrated any intention to offer employment.
Key factors supporting this finding included the worker not being paid for her 3 February shift and the absence of usual employment indicators such as payslips, superannuation, or taxation arrangements.
The Commission found that the acquiring company did not obtain the benefit of her work, as the income generated that day was quarantined for the original employer.
The FWC concluded that while the worker may have believed her employment would continue after the franchise change, no contract of employment existed with the new owner.
