By Anderea Green
The idea behind redundancy pay is to help former employees financially bridge the gap until they find a new job. This is only fair considering that the employee would have lost their job through no fault of their own.
But what happens when the termination of employment is not the employee’s, nor the employer’s, fault? Can the employer avoid paying redundancy pay? Employers may not have to pay redundancy pay if the fluctuation of work is standard to their business.
A genuine redundancy occurs when:
1. The former employee was dismissed; and
2. The dismissal was not on the account of any personal act or default; and,
3. The dismissal was because the employer no longer wished the job the employee had been doing to be done by anyone, or because the employer has become insolvent or bankrupt.
Employers are liable to provide redundancy pay if the employment agreement, award,or legislation that governs the employment requires them to.
For instance, employers who are a “small business” (i.e. one that is with less than 15 employees) do not have to pay redundancy pay.
Also, employers are also not liable to pay redundancy pay when the employee has been working with the same employer for less than 12 months. The most important point of call to determine whether redundancy pay applies in a certain circumstance is to look at the award or agreement that governs the employment relationship.
An employer may no longer wish the job that the employee was doing to be done by anyone because of technological change, relocation, and re-organisation of the business structure, to name a few.
It is also the case that an employee is not entitled to redundancy pay where the employment is terminated because of the business’s ordinary and customary turnover of labour. There have been many State and Federal Court cases that revolve around the question of: when is a termination because of the business’s “ordinary and customary turnover of labour?”
In one case in 1992, the Judge said: “In my opinion, the phrase [“ordinary and customary turnover of labour”] is intended to cover such employees as seasonal workers, or those who, by virtue of the industry in which they work, know that their employment is intended to be of limited duration…”
This attitude has been long-standing.
In 1984, the New South Wales Industrial Relations Commissioner held that: “When a contract was lost the labour that was required to service that contract had to go as well…loss of labour in such circumstances was part of the ordinary and customary turnover of labour.”
But, it’s not that simple. For employers to be able to claim that terminations are in the
ordinary and customary turnover of business, the Courts have developed some conditions.
Although each case will be determined on its own merits, the Courts will look into:
• Whether the employees knew that their work was subject to the employer holding contracts;
• Whether the employer has made reasonable efforts to obtain new contracts;
• Whether the fluctuation of contracts is a normal feature of the business;
• Whether the employer has made reasonable efforts to relocate the employees in a new section or workplace; and,
• Whether the employer has made an economically sensible decision to terminate the employees.
Although this may seem unfair to employees who have been fired through no fault of their own, consideration must be given to the principle behind the rule. To be able to claim that a termination is because of the ordinary and customary turnover of business, such termination must be because of circumstances beyond the control of the employer. Furthermore, employees must have some knowledge of the way the business operates. For example, if a person in the construction industry is employed for one particular development, that person should not anticipate continuous and indefinite work, and therefore should not anticipate redundancy pay every time they finish up work on a job.
Redundancy pay is a great concept to most. Some view redundancy pay as “free money” and a blessing, particularly when it will be easy to find a new job.
Unfortunately for those, it is a “privilege” that should not be abused, and subsequently, the law has followed and made it difficult to obtain the entitlement to redundancy pay.
If you think you may have an issue with redundancy in your workplace and wonder if redundancy pay applies to you, the Fair Work Australia website (www.fwa.gov.au) has some very useful information. You could also contact Fair Work Australia on 13 13 94, or your local law firm.
