Worker sues employer for selling entire business to another – is there unfair dismissal?

Brokerage argues there's no 'compatible position' for him in buyer's company

Worker sues employer for selling entire business to another – is there unfair dismissal?

The Fair Work Commission (FWC) recently dealt with an employee’s unfair dismissal claim filed after his employer sold its business to another.

The employee argued that he could have been absorbed into the other company, but the employer said there was no role for him.

In August 2021, the employee started working as a paraplanner servicing officer for the employer that was engaged in the business of brokerage of insurance and financial services. 

In December 2022, his employment was terminated because the company had sold its entire life insurance book to another business that was not a related or associated entity. 

According to the termination letter it gave to the employee, the employer said, “There is no avenue for him to be employed by the business that took over the life insurance book.”

It further noted the employer had explored “the possibility of employment with its associated company” but said “there is no compatible position” for him.

‘It only sold a small part of the business’

The employee said the employer sold part of the client revenue client base to the group licensee (new company), which was the cause of his dismissal.

He said that this was “not a fair reason for his dismissal,” since the employer is “able to continue  to  provide  financial  services  to  the  remaining  client  base.”

He said that during his employment, he did not receive adequate support, had no performance reviews, and was not paid incentives or commissions as provided in his employment contract.

He further argued that his dismissal was “harsh and unreasonable” as the employer would “continue to provide their clients service and continue to sell  insurance  products  to  their  client  base.”

He said that “the portion of clients sold is a small portion of the business; a portion of 100-120 life [insurance] clients,” adding that the business “will continue to provide service, reviews and sell insurance solutions and products for travel, commercial, general insurance and life insurance.”

On the other hand, the employer said it had “sold its portfolio in its entirety,” so the sale meant that “all ongoing trail commission income [was] transferred to the purchasing entity.” It also said he was the only employee of the employer at the time.

HRD previously reported about the case of a worker who said she was unfairly dismissed because she got fired even though other employees were still performing her role.

In another case, an area manager similarly filed for unfair dismissal after the business said his role was no longer required. He argued that he should have been redeployed.

Was there unfair dismissal?

The FWC said the “test is whether the person’s employer no longer required the person’s job to  be  performed  by  anyone  because  of  changes  in  the  operational  requirements  of  the employer’s enterprise.”

“It is apparent that [such test was satisfied] in this case as following the sale of the life insurance book, the employer had no employees and continues to have no employees,” the decision said.

“The employee’s tenure of employment was reasonably short at approximately 15 months.” It explained when the sale took effect, the employer “ceased to have an income stream of trailing commissions from its life insurance book.”

“[The sale] was to the effect that the only other position that could have potentially been available as at the time of his termination was a junior position… the employee said that he did not regard this as a suitable position for him,” the FWC said.

Thus, the commission said there was no unfair dismissal.

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