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Australia: Federal Court clarifies redundancy payment and notice of termination obligations

Under the Fair Work Act 2009 (Cth) (“FW Act”), Australian employers are required to provide a redundancy payment (the amount of which varies depending the number of years of service of the employee) to any employee whose employment is terminated on the ground that his or her position is no longer required to be carried out by anyone. However, there is an exception to the requirement to pay a redundancy payment if the employee’s employment is terminated “due to the ordinary and customary turnover of labour”. Australian employers are also required to provide employees written notice before terminating the employment of its employees.

The provisions in the FW Act regarding notice of termination and redundancy were considered by the Federal Court in United Voice v Berkeley Challenge Pty Limited [2018] FCA 224.

Prior to October 2014, a related company of Berkeley Challenge Pty Limited (“Berkeley Challenge”) was contracted by Sunshine Coast Plaza to carry out cleaning and provide security services in its shopping centre. Berkeley Challenge employed the staff who carried out those services. In October 2014, the related company was unsuccessful in its tender for a new contract with Sunshine Coast Plaza.

Berkeley Challenge issued a statement to its employees notifying them that the contract with Sunshine Coast Plaza would not be renewed. The Court held that this did not constitute a proper notification of the termination of the employment of the employees. It was held that proper notification in accordance with the FW Act requires language that makes it “unambiguously clear to the employee that his/her employment is to be terminated with effect from a certain day in the future”.

In the proceedings, a union representing the employees also claimed that Berkeley Challenge unlawfully failed to pay the employees redundancy pay in contravention of the FW Act.

Berkeley Challenge argued that it was not required to pay a redundancy payment to the affected employees because the employment of the employees came to an end due to the ordinary and customary turnover of labour.  The Court noted that the onus of proving the exception rests on Berkeley Challenge.

The Court found that the exception only applies if a particular employer decides to terminate a particular employee’s employment and to render that employee’s job redundant in circumstances where the redundancy component of that decision is for that employer, with respect to its labour turnover, both common, or usual, and a matter of long-continued practice.

The Court held that it was not common or usual for Berkeley Challenge to terminate the employment of its employees on the ground of redundancy. To the contrary, it was uncommon and extraordinary for large scale terminations and redundancies to occur within Berkeley Challenge. The Court was not satisfied that there was any long-continued practice of employees being made redundant after the company failed to renew its contract.

Accordingly, Berkeley Challenge was ordered to pay its employees a redundancy payment in accordance with the FW Act.