Redundancy and alternate employment

Tony Cavanagh is a Director at Mullane & Lindsay in Newcastle and specialises in commercial dispute resolution & litigation, and employment law.

A ‘redundancy’ occurs when an employer no longer requires a given job to be performed by anyone. Generally, in that situation, an entitlement to a redundancy payment arises.  There are some exceptions – one of which is where the employer “obtains other acceptable employment for the employee”.  In that situation the employer can apply to the Fair Work Commission (FWC) to reduce the amount of redundancy pay that would otherwise be required.

The issue was recently considered by the Full Bench of the FWC. A security company, FBIS, lost a contract.  An alternate contractor was appointed.  FBIS took a number of steps to facilitate its employees being engaged by the new contractor and 49 of 53 employees were offered and accepted positions with the new contractor on very similar terms to their previous jobs with FBIS.  FBIS then applied to reduce the amount of redundancy paid to the workers, under Section 120.  It was originally successful, but the decision was reversed on appeal.  The matter then went to the Full Bench. The Full Bench held that for an employer to be eligible to reduce redundancy payments under Section 120, it had to prove that it had ‘brought about’ a job offer the employee could accept or reject. Merely taking steps to ‘facilitate’ a transition of employment – which is what had occurred in this instance, by steps such as providing names and contact details to the new contractor; and encouraging it to employ the workers  – was not enough.

The basic situation considered in this case is not uncommon. Many organisations with employees depend upon contracts from other organisations to provide work for their employees.  If they lose a contract to a competitor, such that employees must be terminated, then great care should be taken in how any ‘transitional’ arrangement with an incoming contractor are managed, if there is to be any prospect of reducing the redundancy payments otherwise required: FBIS International Protective Services (Aust) Pty Limited v Maritime Union of Australia [2015] FCAFC 90.

Tony Cavanagh is a Director at Mullane & Lindsay, and practises extensively in Commercial and other Litigation and Employment Law. If you require any assistance in these areas please contact Tony Cavanagh or contact our Newcastle office. We are available for consultations at our Tea Gardens office each Friday between 2:00 pm and 6:00 pm at 191 Myall Street Tea Gardens or at our Newcastle office at any other time during business hours (T:  4928 7300).