Redundancy spats: payouts, contracts and job offers


Redundancy spats: payouts, contracts and job offers

The Fair Work Commission often rules on redundancy issues, including disputes about payouts, contracts and whether job offers constitute acceptable alternative employment.


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The Fair Work Commission often rules on redundancy issues, including disputes about payouts, contracts and whether job offers constitute acceptable alternative employment.

These four cases discuss a range of litigation.

Refused to recognise previous service

The Fair Work Commission has granted different percentages of severance pay to 19 cleaners who were made redundant and then offered jobs with a new employer.

The employer argued that as the new employment was 'acceptable alternative employment' there was no right to redundancy pay. However, the conditions attached to the new employment suggested the job offers were not acceptable in a number of respects.

Central to the commission’s findings was the refusal of the new employer to recognise previous service with a consequent impact on leave entitlements.

Challenger wins contract

All of the employees were either permanent full-time or part-time employees with various periods of service between two and 21 years with Sodexo and its predecessor entity. Sodexo had held the cleaning contract at certain hotels for two years, when it was advised on 26 October 2015 that the contract had been won by Challenger Hospitality Pty Ltd (effective 9 December 2015).

All of the employees were subsequently re-employed by Challenger.

The issue to be determined was whether Sodexo had obtained other acceptable employment for the employees.

All employees who gave evidence agreed they had been informed in October 2015 that Sodexo would no longer be providing cleaning services at the hotels. They were further informed that their underlying terms and conditions would remain the same. In addition, they all understood that Challenger’s offer of employment included a probationary period of six months.

Further, Challenger would not be recognising their previous service with Sodexo or the predecessor.  They also understood Sodexo would not be paying its employees’ accrued personal/carers’ leave.

However, the employees did not lose accrued long service leave.

Prior service not recognised 

The advocate for the cleaners relied on vice president Lawler’s decision in Datacom, in which his Honour said: “Where there is no continuity of employment or recognition of long-service and other non-transferable credits that were not paid out by the outgoing employer then the employee should be entitled to the majority of the s119 entitlement.”

Deputy president Sams, in DRW Investments, said determining whether alternative employment was acceptable would likely include consideration of the following matters: rate of pay; hours of work; work location; seniority; fringe benefits; workload; job security; continuity of service; accrual of benefits; probationary periods; carer’s responsibilities; and family circumstances."

He said the list was not exhaustive and could include other factors.

Employees worse off 

Deputy president Sams concluded that where employees had existing reasons for requesting flexible work arrangements, and had lost that opportunity due to loss of recognition of past service, their reemployment by Challenger could not be considered ‘acceptable’ employment.

These employees should receive 40 per cent of their prima facie entitlement to redundancy pay under s119 of the Act.

Loss of accrued personal leave

The commission found it was likely all employees who were reemployed by Challenger experienced some loss of accrued personal/carers’ leave with Sodexo.

The deputy president noted: "Obviously, the entitlement will vary from individual to individual. In the more extreme cases, a number of employees had over 100 hours (one had 412) of accrued leave... I respectfully agree with observations of Gregory C in Ryans Freighters that the payment of accrued annual leave should be weighed against the detriment of losing accrued personal leave, although I accept unreservedly, that annual leave and personal leave are premised on different beneficial objectives. ... where respondent employees have relied on the loss of accrual of personal leave as the sole basis for opposing Sodexo’s application, that this factor is not of such weight as to justify a conclusion of ‘unacceptable employment’. Redundancy pay entitlements to these employees should be reduced to nil."

Sodexo Australia Pty Ltd T/A Sodexo 

Loss of contract created genuine redundancy

An administrative assistant was genuinely made redundant when a contract for a major client – which provided 80% of her work – was lost in January 2016.

The applicant argued her role covered functions not limited to the contract loss and that her position was still required, but the commission was satisfied the requirements of s389(1)(a) of the Fair Work Act had been met.

R v Asciano Executive Services P/L t/a Patrick [2016] FWC 3615 - O'Callaghan SDP - 8 June 2016

New contract offer equated to termination

A business manager at a motorcycle dealership was unfairly dismissed, the Fair Work Commission has ruled.

A new contract of employment was presented as a performance management tool that essentially sought to change the location of the applicant's employment and change his titled from business manager to relief business manager.

Although the facts indicated a possible redundancy, there was no attempt to argue redundancy. 

Senior deputy president Richards found the employer had initiated the manager's termination and there was no valid reason for dismissal. Compensation of $50,119 was ordered. 

D v Motorcycle Holdings TCO P/L atf The Motorcycle Holdings Group Unit Trust t/a Morgan & Wacker Harley Davidson [2016] FWC 2838 - Richards SDP - 19 May 2016 

Wrong fund to source redundancy pay

Justice Jessup in the Federal Court ruled on the appropriate union fund to provide redundancy benefits for a long-serving administrative assistant.

Two senior union officials clashed over the apprpriate fund from which to source the redundancy entitlements. A strike fund was suggested by one but this was rejected by the court.

Rayner v Ellery [2016] FCA 771 (1 July 2016)

The bottom line: As considerable sums of money are often involved in redundancy matters, parties need to be careful to secure sound legal advice.

See also: Do we pay redundancy if contract completed early?

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