Executives and redundancy entitlements

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Executives and redundancy entitlements

Redundancy entitlements in awards and registered agreements are generally not applicable to non-award employees such as executives.

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Redundancy entitlements in awards and registered agreements are generally not applicable to non-award employees such as executives. However, executives may have redundancy provisions included in their contracts of employment - either by a clause or by implication.

An important initial point to make is that all employees in Australia, including executives, are generally entitled to the minimum notice provisions in the Federal Workplace Relations Act 1996 - up to four weeks notice (after five or more years service).

The issue of particular payments arising from redundancy is addressed below.

Note: NSW legislation - not applicable to executives

The NSW Employment Protection Act 1982 provides for minimum redundancy benefits for employees, but only applies to employees working under State awards or registered agreements.

Contractual provisions

Redundancy may impact on an executive - eg as a result of a take-over. A provision extending redundancy entitlements to executives may be titled 'Redundancy' or ‘Termination due to unforeseen circumstances’ or be treated under the termination provisions as a special note.

Some executives have sought the inclusion of such a clause in their contracts as they have lost positions in the past when companies restructure or are concerned about a future change of this nature.

Employers should carefully consider what precise entitlements might be inserted in an executive contract regarding redundancy. If no reference is made to redundancy, it may be nevertheless considered by a court to be an implied term.

If reference is actually made in the contract and it is a reasonable provision that the employer is comfortable with - expressed as a certain number of weeks pay per year of service with a specified limit - then such a provision may well stand against attempts to secure more through litigation.

Employers may sometimes leave it as a matter for ‘separate negotiation’. This issue should be considered in the light of professional advice.

Other avenues

Note also a general company policy or practice may impact on an executive who is made redundant. Executives could argue that they are entitled to redundancy benefits if a policy or practice is generally applicable across a business. This is still an area for debate - see 'Related' below.

Considering some case law that imposed redundancy payments on an employer despite the employees suffering no material loss, there is a suggestion that it is reasonable to make a provision in executive contracts to provide that redundancy payments are not payable if the position becomes redundant and new employment is provided by the company or through the company intervention and assistance; and the new employment is reasonably comparable in pay and conditions.

Redundancy is a complex area and legal advice should be able to assist with difficult issues. For example, in NSW, there are unfair contract provisions that allow executives (and others) to argue that their contract of employment are unfair and so should be varied. This aspect of NSW law is not addressed in this article.

Related

Minimum notice period on dismissal of non-award employees

Contracts for executive staff

Unwritten redundancy practice an implied term of contract

Severance pay confirmed despite new jobs provided

 

 
 

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