We now deal with the types of employees who are excluded from redundancy provisions of the FW Act through no fault of their own. Many employees have no ability to determine the manner in which they are engaged. This issue relates to matters of informed employment choices. The issue is really regardless of whether an employee is informed about the type of employment they are to be engaged in (for example the benefits and risks it poses to them) they are often unable to make a choice whether to accept it or to seek to alter it due to their significant disadvantage in the relationship due to the inherent power imbalance.
Section 123 Limits on scope of this Division of the FW Act relevantly provides:
Employees not covered by this Division
(1) This Division does not apply to any of the following employees:
(a) an employee employed for a specified period of time, for a specified task, or for the duration of a specified season;
…
(c) a casual employee;
(d) an employee (other than an apprentice) to whom a training arrangement applies and whose employment is for a specified period of time or is, for any reason, limited to the duration of the training arrangement;
…
Other employees not covered by redundancy pay provisions
(4) Subdivision B does not apply to:
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an employee who is an apprentice; or
…………
The first group of excluded employees are fixed term, fixed task or seasonal employees.
Employees may reluctantly accept fixed term, fixed task or seasonal employment because it is all that there is available or they do not know the consequences of the kind of employment in relation to their rights.
Many employees who are engaged under fixed term or task contracts find themselves being re-engaged repeatedly to do the same work. These workers should be treated no differently to permanent ongoing employees in relation to many aspects of the workplace relations system and the redundancy provisions in the FW Act should reflect the industrial reality of how these employees are used by employers.
In the case of seasonal employees the argument for non-availability of redundancy payments is relatively clear. These employees know that they are engaged for a particular season, something which is outside of the employer’s control, such as a certain time of year when certain fruits or vegetables require picking and processing or when there is a cycle of demand and down turn due to weather, for example alpine resorts. It can be said that such seasonal variances are normal features of a business.
The second group of excluded employees are casual employees.
The FW Act provides a number of rights and entitlements351 to a certain class of casual employees. Generally speaking it is employees who have been engaged on a regular and systematic basis for a prescribed period of time (regular and systematic casuals). Regular and systematic casuals are not entitled to redundancy pay even though for all intents and purposes (and in some cases in law and fact) they are utilised by the employer as if they were permanent employees. We submit that the redundancy provisions of the NES should not exclude regular and systematic casuals.
Reduction of Entitlements
Section 120 Variation of redundancy pay for other employment or incapacity to pay of the FW Act provides:
(1) This section applies if:
(a) an employee is entitled to be paid an amount of redundancy pay by the employer because of section 119; and
(b) the employer:
(i) obtains other acceptable employment for the employee; or
(ii) cannot pay the amount.
(2) On application by the employer, the FWC may determine that the amount of redundancy pay is reduced to a specified amount (which may be nil) that the FWC considers appropriate.
(3) The amount of redundancy pay to which the employee is entitled under section 119 is the reduced amount specified in the determination.
An employer can seek to reduce the amount of redundancy pay provided to an employee if the employer has obtained other acceptable employment for the employee. There are two questions to consider in relation to this. The first is, what is meant by ‘obtain’ and secondly, what is meant by ‘other acceptable employment’.
There is currently much contention in relation to the first question and the issue is the matter of Federal Court Proceedings352, referred to in Chapter 7. It is vitally important to remember that the primary purposes of redundancy pay are to compensate employees for the loss of non-transferrable employment ‘credits’ such as long service leave and personal/carer’s leave and, as compensation for the inconvenience, hardship and anxiety of searching for another job and/or changing jobs. While there is some element which provides for income maintenance during unemployment and compensation for termination, such elements are not the focus of redundancy pay. In the First TCR Decision the Full Bench said:
“…we do not believe that the primary reason for the payment of severance pay relates to the requirement to search for another job and/or to tide over an employee during a period of unemployment.
…it would be misleading to assume that success in obtaining a new job indicated that an individual made redundant had managed to recover the security built up over years of service in the redundant job and we are prepared to grant severance pay, in addition to the measures we have awarded to assist employees find alternative employment.”
As such, an employer’s obligation to make redundancy payments does not disappear if an employee finds alternative employment, even when the employer assists with this.353
In Derole Nominees Pty Ltd and Australian Chamber of Manufactures (1990) 140 IR 123 (Derole), where it was held that the intention of the meaning of “obtaining alternative acceptable employment” within an award was “not to impose an absolute test of the employer’s ability to ‘obtain’ alternative employment but [rather refers] to an action which causes alternative employment to become available to the redundant employee. The Employer must be a strong moving force towards the creation of the available opportunity.”
It should not be an easy thing for employers to avoid their obligations to make redundancy payments. The first reason is that obtaining other acceptable employment does not remedy or resolve the primary reasons for which redundancy pay is required.
Further, in some situations, particularly those where a commercial outsourcing contract comes to an end and employees are needed by the next service provider, employees may be offered work with the incoming contractor, who needs the labour to fulfil their contractual obligations. As such, it is common to see the same group of employees working for the same host with a cyclical list of employers, over which the employees have little to no control over.
An entitlement to redundancy pay is meaningless unless a worker has the requisite service to be entitled to some payment (i.e. 12 months service). Where these change of contracts occur suddenly and frequently, workers may change employers on a regular basis meaning that they might never accrue the needed service to be entitled to any payment.
In determining whether the new position is ‘acceptable alternative employment’, the FW Commission applies an objective test where a number of factors are weighed up. These factors might include the nature of the work, the rate of pay, working hours, skills, duties, seniority and location of the work.354 Critically however, continuity of service is not a necessary element to satisfying the criteria that a position is acceptable alternative employment.
We submit that whilst the test that is generally applied by the FW Commission is appropriate, and that they are the most appropriate body to deal with such questions, it is manifestly unfair that a position can be ‘acceptable alternative employment’ where continuity of service is not recognised.
This unfairness gives rise to a scenario where an employee is not entitled to redundancy pay from their old employer, however starts with the new employer without any recognition of their prior service. This means in practice that these workers are particularly vulnerable to spurious dismissals because they are not eligible to make an unfair dismissal application and are forced to satisfy a new probationary period of employment. It also means that they are not compensated for other non-transferable credits such as:
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Personal / carers leave
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Long service leave
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Access to service based entitlements such as parental leave
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The amount of redundancy pay that an employee might be entitled to be paid in the future
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Amounts of compensation that might be awarded in the future, which are based on service, will be reduced (for example unfair dismissal application will only consider the service with the current employer in respect to the calculation of compensation).
This is unlike transfer of business arrangements, whereby generally the employee’s service is counted with the new employer.
Transfer of business arrangements arise where the same or similar work performed by an employee effectively transfers to a new employer and there is one of the following ‘connections’ between the old and new employer:
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An arrangement that the new employer owns or has use of some or all of the old employer’s assets that relate to the transferring work;
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The work from the old employer is outsourced to the new employer;
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Work previously outsourced is insourced; or
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The old and new employer are associated entities within the meaning of section 50AAA of the Corporations Act 2001.
Under the transfer of business provisions, where the new employer is not an associated entity of the old employer, the new employer decides whether or not to recognise the employees accumulated service for the purposes of annual leave and redundancy pay under the NES. If the new employer decides not to recognise their previous service, then the employee is entitled to receive payment for their accrued leave entitlements and redundancy.
Change of contract scenarios typically do not give rise to a ‘connection’ and therefore workers and their conditions of employment are not protected by the transfer of business provisions.
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