If I still have a job, am I redundant?: A guide to knowing when a redundancy is triggered

Siobhan Mulcahy, Director and Alexis Agostino, Graduate Associate

In the recent case of Serco Sodex Defence Services Pty Ltd [2015] FWC 641 Christmas came early for a number of employees when they received redundancy payments from their outgoing employer Serco Sodex Defence Services Pty Ltd (“SSDS”), despite obtaining substantially similar employment from an incoming contractor after the Australian Defence Force (“ADF”) decided not to renew a number of their contracts with SSDS.

The Facts

In 2012 SSDS a specialist service provider to the ADF lost five of its six contracts with the ADF. As a result of the loss of contracts a number of SSDS’ employees positon were identified as redundant and accordingly SSDS took a number of steps to assist affected employees in gaining employment with the incoming contractors. These steps included:

  • informing employees about other contractors, advertising available positions and encouraging them to apply;
  • allowing employees to attend information sessions with incoming contractors during work hours and in some cases allowing these sessions to be conducted on site;
  • providing assistance to employees with their applications and online submissions as well as submitting applications to contractors on behalf of the employees;
  • assisting in scheduling job interviews and medical assessments and allowing employees to attend these sessions during work hours; and
  • acting as a conduit between employer and incoming contractors, after offers of employment had been made to employees by providing letters of acceptance to the incoming contractor and allowing employees to attend induction sessions and uniform fittings.

A number of employees were successful in obtaining employment with the incoming contractors in essentially the same or similar roles. Accordingly, SSDS made an application under sections 120 and 739 of the Fair Work Act 2009 (Cth) (“FW Act”) to have the redundancy payments owed to their New South Wales/Australian Capital Territory employees reduced, arguing that as a result of its assistance many employees had obtained acceptable employment with the incoming contractors.

Section 120 of the FW Act provides:

Variation of redundancy pay for other employment or incapacity to pay

  1. This section applies if:
    1. an employee is entitled to be paid an amount of redundancy pay by the employer because of section 119; and
    2. the employer:(i)  obtains other acceptable employment for the employee; or

      (ii)  cannot pay the amount.

  2. On application by the employer, the FWC may determine that the amount of redundancy pay is reduced to a specified amount (which may be nil) that the FWC considers appropriate.
  3. The amount of redundancy pay to which the employee is entitled under section 119 is the reduced amount specified in the determination.

In order for an application under section 120 to be successful, the Fair Work Commission (“FWC”) must find that outgoing employer was responsible for securing work for the employee with the incoming employer. In particular the FWC held that “there must be a causal connection between the purpose and effort of the employer and the gaining of employment or an offer of employment, by the employee”.

In his decision Commissioner Roe gave several examples of what actions may entitle an employer to an exemption to pay redundancy including:

  • where the outgoing employer secures a position for its employee/employees without the need for that employee to go through a selection process;
  • where the agreement made by the outgoing employer with the incoming employer causes the job offer to be made; or
  • where the actions of the employer are a “strong moving force” toward the employee obtaining work with the incoming employer.

Ultimately the Commissioner Roe held he “was not satisfied that SSDS obtained suitable employment for its employees” and therefore the applications by SSDS were dismissed.

For completeness we note that Commissioner Roe did not dismiss the application made in relation to the contractor MSS and listed further a proceeding, although this proceeding has been discontinued. It should also be noted that in separate proceedings SSDS’s application for Northern Territory employees has also been dismissed while applications for Queensland are yet to be determined.

Key Takeaways

  1. In circumstances where a redundant employee must compete for jobs with an unassociated entity and participate in a selection process, it will be far more difficult to argue that employer’s actions were responsible for the employee securing a job.
  2. It should be noted that had SSDS applied for exemptions for individuals rather than the entire group of employees, they may have had more success in outlining how their actions resulted in specific employees gaining employment.
  3. Set up a document trail to assist any application.
  4. Simply facilitating meetings will not satisfy the requirement of this section. Attempt to broker formal arrangements with in-coming contractors. For example by agreeing to assist with a handover in exchange for the incoming contractor engaging a number of employees.

An Update on the Modern Award Review

Alison Spivey, Senior Associate and David Weiler, Graduate Associate

In our May 2014 issue of Strateg-eyes we provided an overview of the four-yearly review of modern awards that is being conducted by the Fair Work Commission (“Review” in accordance with the requirements of the Fair Work Act 2009 (Cth)). In this issue we provide an update on the progress of the Review, and in particular its progress in respect of the “common issues” agreed by the parties in February 2014.The four-yearly review of the Modern Awards has been underway for over a year, with the Fair Work Commission (“Commission”) now having received submissions from many different employee and employer interest groups in their pursuit of changes to the current award system.

As any changes arising from the Review will impact the obligations of award-covered employees, it is imperative that employers keep up to date with the progress of the Review, and understand the implications of any proposed changes to the award system for their business.

“Common Issues”

In the second step of the Review process the Commission identified specific “common issues” which, if varied, will have a significant impact across the award system. The common issues include:

  1. annual leave;
  2. casual and part-time employment;
  3. penalty rates;
  4. public holidays; and
  5. award flexibility and transitional provisions relating to accident pay, redundancy and district allowances.

The common issues are being considered by the Commission in stand alone proceedings, as opposed to on an award-by-award basis. However, this does not mean that if variations are granted, they will apply consistently to all or even most awards.

The key developments in respect of each of the common issues to date are discussed below.

Annual Leave

The primary issues under consideration by the Commission in respect of annual leave as part of the Review are:

  1. cashing out of annual leave;
  2. excessive annual leave;
  3. EFT payments prior to paid annual leave;
  4. annual business close downs;
  5. granting leave in advance; and
  6. the payment of annual leave entitlements on termination.

It was initially proposed that the Australian Council of Trade Unions (“ACTU”), the Australian Industry Group (“Ai Group”) and the Australian Chamber of Commerce and Industry (“ACCI”) present a joint statement of agreed issues. However, the parties were unable to reach any agreement and as a consequence all matters were contested.

The matters were heard in October and December 2014 and a decision is expected to be handed down shortly.

Casual and part-time employment

The primary issues under consideration by the Commission in respect of casual employees are minimum engagement, conversion to part or full-time employment and restrictions on casual engagement.

The Commission invited parties to make submissions regarding these issues, with the ACTU recently proposing model clauses to address the conversion from casual to full or part-time employment. These amendments would affect circumstances when a casual employee has the right to have their employment converted to full or part-time employment and when a casual employee is deemed to be employed on a permanent full-time basis after a certain length of time.

The ACTU is also seeking to establish a four hour minimum obligation, prohibitions on engaging workers as casuals or independent contractors in order to avoid award obligations and a requirement for employers to ask existing employees if they want more hours before hiring additional casual or part-time employees.

Both the Ai Group and ACCI have indicated they will vigorously oppose the changes proposed by the ACTU when the Full Bench hears these matters later this year.

Penalty Rates

Penalty rates continue to be intensely debated during the Review. The Commission has separated the matter of penalty rates into two industry groups (Hospitality and Retail) and will also hear common evidence for issues which affect both industries. The common evidence hearing is scheduled for mid July 2015, with the hospitality-specific matters scheduled to be heard in late August 2015 and the retail-specific issues in late September 2015.

Earlier this year the Australian Retailers Association, National Retail Association and Masters Grocers Australia/Liquor Retailers Australia joined together calling for a decrease in Sunday penalty payments from 100% to 50% and these issues have also been the subject of intense media scrutiny. Expert evidence from a range of areas, including senior economists, will be relied on in support of this change during the common evidence hearing set in mid-2015.

Public Holidays

As part of the Review, employer groups are advocating for a penalty rate for the eight national public holidays and a distinct, lower, penalty rate for any additional state or territory public holidays. The Commission has ruled that these issues will be dealt with as part of the public holidays common issue as opposed to during the Commission’s deliberations on penalty rates. In terms of the timing of determination of these issues, business groups have submitted that proceedings regarding penalty rates should be heard and determined prior to the public holiday submissions.

Additionally, union groups are seeking the inclusion of a clause into several awards that provides if a public holiday falls on a day an employee is not rostered to work they will be entitled to another day off in lieu or equivalent pay in lieu or an extra day added to the employee’s annual leave.

Family and domestic violence leave and family friendly work arrangements

The ACTU has made submissions to include 10 days paid domestic violence leave and a right to request a change in working arrangements in connection with their disclosure of domestic violence in modern awards.

“It is crucial that you are informed of any new requirements that may impact on your business’ obligations.”

The ACTU’s claim includes incidental and ancillary provisions which, amongst other things:

  1. address evidentiary and notice requirements for an application for family and domestic violence leave;
  2. appoint a workplace contact for employees to whom applications for the leave and requests for changes to working arrangements would be made (accessing such measures would involve disclosure of domestic violence); and
  3. clarify the role and responsibilities of the contact person(s) to whom an employee has disclosed domestic violence.

In relation to what friendly work arrangements under modern awards should include, the ACTU has proposed the following:

  1. requests for family friendly work arrangements during pregnancy or upon return to work from parental or adoption leave;
  2. a right to return to substantive position and work arrangements held prior to returning to work from parental or adoption leave; and
  3. additional elements including that employees may access their personal leave to attend pregnancy, ante-natal and/or adoption related appointments.

What should you do?

If your business has award-covered employees and applies the terms of the award, you need to keep a close eye on changes to the system that will inevitably come at the end of the Review. Since breaches of modern awards may lead to heavy penalties being awarded against both the business and the individuals who are involved in the breach, it is crucial that you are informed of any new requirements that may impact on your business’ obligation.

Alternatively, you can take steps to remove some of the confusion and uncertainty attaching to reliance on modern awards and move award-covered employees onto individual employment contracts or introduce an enterprise agreement into your workplace. It is important, however, that in doing so you ensure that your employees are not worse off than under the award.

PCS specialises in engaging with businesses to gain certainty without the complexity that so often arises under the modern award system.