Severance pay — a general entitlement

Cases

Severance pay — a general entitlement

There exists a broad right for employees who are not provided with severance payments through an award or industrial instrument to seek an order for such payments.

WantToReadMore

Get unlimited access to all of our content.

There exists a broad right for employees who are not provided with severance payments through an award or industrial instrument to seek an order for such payments. The Workplace Relations Act 1996provides for the making of orders to give effect to the requirements of the ILO Termination of Employment Convention.

The decision in Section 170FB Application by the Association of Professional Engineers, Scientists and Managers, Australia, Print S9143, [2000] 1007 IRCommA, 4 October 2000, found that an employee made redundant was entitled to a redundancy or severance payment even though his employment contract and award made no provision for severance pay. The other issue to come out of this matter was the finding that Australia’s Social Security system is not an alternative mechanism by which effect can be given to the requirements of the Convention, which provides for entitlements in accordance with national law and practice at a minimum level.

Background

The Association of Professional Engineers, Scientists and Managers, Australia (the union) applied to the Commission for an order for severance payments on behalf of a member who had been formerly employed by Scott Carver Pty Ltd (the employer). The order sought was for six weeks severance pay.

Employed as a Project Engineer on 8 October 1996, the employment of the former employee was terminated on the ground of redundancy on 12 April 1999. Relevant to these proceedings were the following facts:

  • the former employee was not paid severance pay;

  • the employer was a respondent to the Federal Technical Services – Architects – Interim Award 1998; and

  • the award made no provision for severance pay .

Legislation and Submissions

The union application was made pursuant to s170FBof the Workplace Relations Act 1996. The purpose of the application was to have the Commission make an order under s170FA. Section 170FAprovides that the Commission may make an order for the purpose of giving effect to the requirements of Article 12 or 13 of the ILO Termination of Employment Convention. Article 12 of the Convention provides that employees are entitled in accordance with national law and practice to a severance allowance or other separation benefits. In this matter, the union submitted that the former employee having been made redundant was therefore entitled to a redundancy or separation payment of minimum entitlement. This amounted to six weeks pay in accordance with the minimum national standard for severance payments in Australia as set out by the Termination, Change and Redundancy case, (1984) 8 IR 34.

The union noted that s170FCprecludes the Commission from considering an application such as this if there exists an alternative mechanism by which effect will be given to the requirements of Articles 12 and 13 of the Convention. In this instance the union contended that s170FChad no application as neither the former employee’s employment contract nor the relevant award contained provisions relating to redundancy or severance pay.

The union’s application was opposed by the employer who was supported by the Australian Chamber of Commerce and Industry and the Commonwealth (both of which had been granted leave to intervene in this matter). The argument against the union application was the claim that s170FCprecludes the Commission from arbitrating in circumstances where an alternative mechanism is available and meets the requirements of Article 12 of the Convention. The Commonwealth argued that the benefit of the Social Security system is the alternative in Australia. It was claimed that there exist alternative means by which the requirement of Article 12 may be satisfied, that being a social security system of general scope that is set at an adequate level.

Decision

The Commissioner commenced by noting that the intention of ss170FA170FEof the Actis to provide employees with access to severance payments where they are not available as an award entitlement. Having considered the evidence and submissions, Harrison C came to the view that Australian practice is for severance pay to be made available regardless of whether an employee is entitled to social security. The Commissioner held:

I am not satisfied, having regard to s170FC, that the Social Security system is an alternative mechanism by which effect can be given to the requirements of Article 12, which provides for entitlements in accordance with national law and practice at a minimum level. Australia’s Social Security system is not specific to severance payments where an employee loses non-transferable benefits. Rather it provides in part, a safety net for those who are unemployed or aged. 

The non-transferable benefits referred to by the Commissioner included the loss of non-transferable credits such as the accrual of long service leave entitlements and sick leave.

Overall, the Commission found nothing preventing the making of an order to give effect to the requirements of Article 12. Therefore, having regard to the merits of the application, the Commission exercised its discretion and issued an order in the terms sought by the union – awarding the former employee six weeks severance pay.

 

Post details