BlandsLaw - Waiving the Obligation for Redundancy Pay
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Waiving the Obligation for Redundancy Pay

The National Employment Standards provide for redundancy pay, to eligible employees, based on their length of service. There is provision under the Fair Work Act for employers to make an application to have their obligation to make redundancy payments reduced or even waived completely. The two grounds for this application are that the employer has obtained other acceptable employment for the employee, or that they cannot pay the amount. 

A recent FWC decision considered the issue of what an employer needs to do to show that they ‘obtained’ the other acceptable employment. Serco Sodexo Defence Services Pty Ltd (‘Serco’) lost a number of its defence contracts. The effect of this was that hundreds of employees, around Australia, needed to be made redundant. Many of these employees took up jobs with the new contractors. Serco accordingly sought orders seeking to waive their obligations for redundancy pay based on the employees obtaining alternative employment. A series of hearings have been held to consider the position of groups of affected employees.

Commissioner Roe applied the full bench decision in FBIS and said that the employer needs to be able to demonstrate that it was a ‘strong moving force’ in the creation of the job opportunities. Basically there needs to be a fairly clear connection between the actions of the employer and the employee obtaining the new job.

Although many of the employees did in fact gain jobs with the new contractors this was not held to be a result of Serco’s actions. It was noted that where the new employer is running a competitive recruitment process it will be difficult for the previous employer to show that it exercised the requisite level of influence over the outcome.

In relation to the NSW and ACT employees, it was held that Serco did not meet the requirements of s120 and were therefore required to make redundancy payments to eligible employees.

Lesson for Employers

Where an employee’s position is made redundant and a redundancy payment applies (either pursuant to the legislation or the employee’s employment contract) then, in most cases, the employee will be entitled to receive the payment.

One of the exceptions to the obligation to pay a redundancy payment is if the employer finds the employee suitable alternative employment. To successfully have an order made under s120 granting an exemption from making redundancy payments, an employer must be able to show that it played a major part in securing the alternative employment for the employee. For example, that it secured arrangements to guarantee the employee a job or that its actions directly resulted in the employee being given the job. In this case the fact that some employees were successful in obtaining employment with the new service provider was not in itself sufficient to exempt the employer from making redundancy payments to those employees.

 

Overview/ Summary of Article

A recent FWC decision has applied and affirmed the approach of an earlier case in relation to waiving redundancy pay obligations where alternative employment has been arranged. An employer needs to be able to show that it is a ‘strong moving force’ in the obtaining of alternative employment for affected employees. 

 

[1] Serco Sodexo Defence Services Pty Ltd (SDDS) [2015] FWC 641. https://www.fwc.gov.au/about-us/news-and-events/statement-issued-serco-sodexo-defence-services-pty-ltd

 

[1] Maritime Union of Australia v FBIS International Protective Services (Aust) Pty Ltd [2014] FWCFB 6737. See our earlier article on this case http://blandslaw.com.au/blog2/187-redundancy-payments-and-alternative-employment.html

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