Section 7. (a) Twelve months after the acceptance of this chapter, or such earlier date not prior to six months after said acceptance, as the commission shall determine, the employees of the municipality whose work is primarily related to the water works system or the sewer works system shall be transferred to the commission and become employees of the commission subject to the provisions of this chapter. Terms of office of such employees shall not be deemed to be interrupted by such transfer and rights, seniority, wages, salaries, hours, and working conditions of such employees, including, but only so long as such an employee holds the position which is comparable to the position in which he was classified prior to transfer rights under chapter thirty-one, shall be preserved in their employment by the commission, provided that after such transfer such employees perform their duties subject to the direction, control and supervision of the commission. The terms and conditions of employment of any other persons whom the commission may employ shall be determined by the commission, provided that the commission shall take into account and provide for continuation of seniority, vacation and sick leave rights and other benefits based on prior employment with the municipality for former employees of the municipality who enter the employment of the commission other than by transfer under the previous sentence, but all persons employed by the commission under this sentence shall not thereafter be subject to any provision of chapter thirty-one. Notwithstanding any provisions of any general or special law, to the contrary, the commission in filling vacant positions may give preference over applicants who are not employees of the commission to any person who is either an employee of the municipality or a former employee of the municipality laid off for lack of funds who applies for the vacant position unless the commission determines in its sole discretion that such applicant is not qualified for the position.

(b) Every employee who immediately prior to being transferred to the commission by this section is a member of the municipal contributory retirement system established under chapter thirty-two, or predecessor retirement systems thereto, shall continue to be a member thereof and subject to the laws applicable thereto. All other employees of the commission shall be required to become members of the municipal contributory retirement system in the same manner and subject to the same laws, rules and regulations as persons entering the employ of the municipality. The commission shall deduct from the wages of its employees and pay over to the municipal retirement board such sums as the municipality would deduct and pay over if such person were an employee of the municipality.

The commission shall reimburse the municipality for its proportionate share of any amounts expended by the municipality under the provisions of chapter thirty-two for retirement allowances to or on account of employees of the commission.