I say 'assist', you say 'obtain': What  to do to claim the redundancy pay  exemption


I say 'assist', you say 'obtain': What to do to claim the redundancy pay exemption

The Fair Work Commission's refusal of an employer's application to reduce its redundancy pay liability has highlighted the issue of "obtaining" acceptable alternative employment.

By Marie-Claire Foley, Kathy Srdanovic, Geoffrey Giudice and Liz Grey 

The Fair Work Commission's refusal of an employer's application to reduce its redundancy pay liability has highlighted the issue of "obtaining" acceptable alternative employment.

[Full text of this case:  Serco Sodexo Defence Services Pty Ltd (SSDS) [2015] FWC 641

What you need to know

  • To be eligible for a redundancy pay exemption or variation, an employer must "obtain" other acceptable employment for the redundant employee. An employer "obtains" other acceptable employment where its actions cause the employment to become available, and where the employer is a strong moving force towards the creation of the available opportunity.
  • The test requires more than just assisting and encouraging a redundant employee to find a new job – there must be a causal connection between the purpose and effort of the employer and the gaining of employment by the employee.
  • The FWC will determine whether the employment is "other acceptable employment" having regard to a range of factors, including the wages and conditions of the new role, work status, work location, working hours, level of job security and continuity of service. Even if the employer obtains acceptable alternative employment, the FWC may not reduce redundancy pay liability to nil where the incoming employer does not recognise the redundant employee's service.

What you need to do

  • To be eligible for a redundancy pay exemption or variation, employers need to take positive steps to secure employment for redundant employees.
  • This may involve reaching an agreement with the incoming employer that it will employ the redundant employee without the need for a competitive selection process, providing an incentive to the incoming employer to employ the redundant employee, or providing information to the redundant employee about the job opportunity that he or she otherwise would not have obtained.
  • Informing employees about job opportunities, assisting them to participate in a competitive recruitment process with the incoming employer and encouraging employees to apply for roles will not be enough to satisfy the test.

In a series of recent determinations the Fair Work Commission refused to grant an employer's
applications under the Fair Work Act 2009 (Cth) to reduce its substantial redundancy pay liability. The
FWC found that the employer had failed "to obtain" other acceptable employment for its redundant
employees, despite the majority of the employees having successfully secured alternative employment.

The decisions

The employer, SSDS, made a significant number of employees redundant as a result of the loss of several defence contracts. The employer applied for orders under sections 120 and 739 of the FW Act in respect of its NSW and ACT, Northern Territory/Kimberley and Queensland workforces to reduce its redundancy pay liability on the basis that it had obtained other acceptable employment for the employees with incoming contractors. Commissioner Roe heard the proceedings in three parts.

In each of the decisions, Commissioner Roe acknowledged the efforts by the employer in assisting
employees to find alternative employment, but dismissed the applications on the basis that the
employer's actions did not cause the employees "to obtain" the alternative employment within the
meaning of section 120 of the Fair Work Act 2009 (Cth).

This alert looks at the decision in respect of the NSW/ACT workforce, Serco Sodexo Defence Services Pty Ltd (SSDS) [2015] FWC 641.

The employer has appealed the decision in respect of the NT workforce. We expect a Full Bench to hear the appeal in March 2015.

The first of its kind

Commissioner Roe noted that this was the first case in which section 120 applications had been brought in respect of a very large number of employees. He said that despite the applications being brought in respect of a large group, an employer must show that it obtained employment for each of the employees.

Test for "obtaining" other alternative employment

The Commission applied the Full Bench authority established in Maritime Union of Australia v FBIS
International Protective Services (Aust) Pty Ltd
[2014] FWCFB 6737, that an employer "obtains" other
acceptable employment for an employee where its actions:
  • cause the acceptable alternative employment to become available to the redundant employee; and
  • are a strong moving force towards the creation of the available opportunity.
Commissioner Roe added 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.

What actions did the employer take?

The employer gave evidence that it went to great lengths to assist employees in securing alternative
employment, including by:
  • communicating with employees through various forums about the loss of contracts and incoming contracts, the positions available, the recruitment process being used by the different contractors and resume and interview techniques;
  • facilitating the scheduling of information sessions, interviews and/or medical assessments as required by incoming contractors;
  • encouraging employees to apply for positions with incoming contractors;
  • assisting employees to upgrade their security clearances so that they were eligible for certain
  • positions; and
  • cooperating with incoming contractors and providing them with information to assist with the recruitment process.

Why were the employer's actions insufficient?

Commissioner Roe accepted that the employer expended considerable resources to assist its
employees in obtaining employment, and that these actions went considerably beyond what was required
under the consultation provisions of the relevant agreements. However, he found that the employer's
actions fell well short of what was required under section 120, noting in particular that:
  • the evidence did not establish that a particular activity or activities were so widespread and effective to enable the conclusion that the employer's actions caused the alternative employment to become available for the group of employees; and
  • the employees were required to participate in a competitive selection process with the incoming contractors. They were selected based on their qualifications, experience and ability to meet the incoming contractors' selection criteria. The strong moving forces towards the creation of a job offer were therefore the actions of the candidate and the incoming contractor, not the current employer.

The Commissioner placed considerable emphasis on the fact that the employees were required to
participate in a competitive selection process with the incoming contractors. Commissioner Roe said that
where employees are required to participate in such a process with an incoming employer, it will be difficult to decide if the actions of the outgoing employer materially influenced the making of any job offers, let alone if the actions were a strong moving force leading to that outcome.

Finally, Commissioner Roe found that the employer tried to maximise the appearance of
cooperation in order to strengthen its case to reduce redundancy pay. He said the language in the
communications to employees needed to be considered having regard to this context.

What actions will satisfy the test?

Commissioner Roe gave the following examples of where an employer might be able to demonstrate that
it obtained acceptable alternative employment for its employees, noting that this was not an exhaustive list and would depend on the circumstances:
  • where the outgoing employer approaches the incoming employer and secures agreement to employ a particular employee or group of employees without the need for a selection process;
  • where the outgoing employer provides information about the job opportunity which the employee would not have otherwise obtained; or
  • where the outgoing employer provides assistance to an employee and/or reaches agreement with the incoming employer which causes the job offer to be made or was a strong moving force towards the job offer.

The MSS contract

Initially, Commissioner Roe did not dismiss the application in respect of persons employed by MSS,
one of the incoming contractors. In respect to MSS, Commissioner Roe determined that while the actions of the employer were insufficient to cause alternative employment to become available, the actions of the employer did make a more significant difference to the likelihood of some employees being offered work than with other contractors. This was the case because:
  • there was a formal agreement between the employer and MSS which effectively gave the employer's employees preference;
  • there was an incentive for MSS to maximise its engagement of the employer's employees;
  • a very high proportion of the employer's employees applied for and were successful in securing employment with MSS; and
  • MSS hired a very small proportion of external people.
Commissioner Roe invited the parties to produce evidence in respect of individual employees and to
make further submissions. The employer declined to do so and Commissioner Roe dismissed the application accordingly.

What is "other acceptable employment"?

It was not necessary for the Commission to consider whether the alternative employment was "acceptable" in light of the finding that the employer did not obtain the employment. Nevertheless, Commissioner Roe considered that this would need to be determined having regarding to a range of factors, including: wages and conditions of the new role (eg, breaks, bonuses, leave entitlements and allowances), work status, work location, working hours, level of job security and continuity of service.

Commissioner Roe considered that where prior service was not recognised by the incoming employer, this loss should be compensated. He said that in these circumstances, the redundancy pay liability could not be reduced to nil even if the alternative employment is acceptable.

Making the case: Insights from Geoff Giudice

The Commissioner decided that in cases where the new employer engaged the redundant employees after a merit-based selection process, the old employer did not "obtain" the employment in the relevant sense. This way of looking at the matter has the potential to produce unfair results. In situations where the new employer engages the redundant employees after a merit-based selection process, whether the new employer insists on a redundant employee going through a merit-based selection process or not is a matter which for the most part is outside the first employer's control. The fate of an employer's application for relief from redundancy pay obligations would to that extent depend on a factor the employer had no power to alter. Merit-based selection is, of course, very common if not the norm. 

Marie-Claire Foley is a partner, Kathy Srdanovic is a senior associate, Geoffrey Giudice is a consultant and Liz Grey is a lawyer at Ashurst.

This article was first published in Ashurst's Employment Alert on 18 February 2015. Reproduced with permission of Ashurst.
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