Unwritten redundancy practice an implied term of contract

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Unwritten redundancy practice an implied term of contract

A WA manager has almost doubled her redundancy entitlement after the WA IRC supported her claim that the payment of a higher level of entitlements, was a practice which, 'regularly and consistently occurred'.

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A WA manager has almost doubled her redundancy entitlement after the WA IRC supported her claim that the payment of a higher level of entitlements, was a practice which, 'regularly and consistently occurred'.

Background

The employee made her claim under s.29(1)(b)(i) of the Industrial Relations Act 1979(WA) saying she was entitled to a benefit under the contract of employment which had not been allowed by the employer.

The employee was made redundant soon after the Locker Group took control of her employer, RPL. When she was paid two weeks redundancy for every year of service instead of 3.5 weeks as she had expected, she took her case to the IRC.

The commission heard that during the employee’s 15 year career with RPL she had received several promotions, but none of her letters of employment detailed redundancy entitlements. Nor did her evidence refer to any verbal representation from RPL that she would be entitled to 3.5 weeks’ pay per year of service upon being made redundant.

The employee instead argued that it was an implied term of her contract which arose out of RPL’s practice of paying its employees the same redundancy payment; as contained in the enterprise bargaining agreements negotiated for the production workforce in the company’s Braybrook factory in Victoria.

She said that to her knowledge the redundancy payment from the EBA was always paid when RPL made any of its employees redundant throughout Australia and that it was a policy or unwritten practice. Evidence from two RPL payroll staff supported this 'understanding'. At the time of her redundancy she was still an employee of RPL.

The Locker Group gave evidence that when it performed due diligence on RPL it was informed that there were no redundancy agreements in place at RPL other than the EBA-enshrined entitlements for the Victorian factory. The Locker Group’s own redundancy policy prescribed two weeks’ pay for each year of service.

The commission heard it was not until the employee challenged the redundancy payment made to her that the Locker Group investigated the past redundancy payments actually made by RPL and discovered 3.5 weeks had been the customary entitlement.

Findings

Senior Commissioner Beech found that the evidence of RPL’s past payment practice led to the 'irresistible conclusion' that there was a 'professional practice' within RPL to pay non-production staff the same redundancy entitlements as factory employees. He said this was so even if the payments were not made pursuant to a legal entitlement and might fairly be labelled 'ex gratia'. He further noted that a number of the termination advice letters in evidence referred to the total termination payments as entitlements.

'It was a practice which regularly and consistently occurred. On that evidence, it is open in law to imply a term in [the employee’s] contract of employment that if she was made redundant she would be entitled to a redundancy payment at the same rate as prescribed for production staff at Braybrook under the EBA.'

The senior commissioner went on to find that if the entitlement claimed by the employee had been raised with her and RPL prior to her redundancy and prior to the Locker Group assuming management control, they would both have regarded the entitlement claimed as 'so obvious that it goes without saying'.

Commissioner Beech concluded that there was a term implied into the employee’s contract that if she was made redundant she would be paid a redundancy payment at the EBA-agreed rate and that this was a 'benefit' under her contact of employment for the purposes of s.29(1)(b)(ii) of the Act.

Deborah Anne Miller-Smith v Locker Group Pty Ltd and Richardson Pacific Limited, 2004 WAIRC 12498 (25 August 2004).

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