Resources: Blog

Employer fails to demonstrate that redundancies were due to the ordinary and customary turnover of labour

Blog
|

No ordinary job

The FW Act provides a minimum entitlement to redundancy pay in situations where an employee’s position is genuinely made redundant.

The Fair Work Act 2009 (Cth) (FW Act) provides a minimum entitlement to redundancy pay in situations where an employee’s position is genuinely made redundant. There are exceptions, however, to when this entitlement will be paid, one of which is when the employer no longer requires the job to be done due to the “ordinary and customary turnover of labour”.

What this phrase actually means was recently considered by the Federal Court of Australia in the decision of Fair Work Ombudsman v Spotless Services Australia Ltd [2019] FCA 9.

In this matter, the Fair Work Ombudsman (FWO) alleged that Spotless contravened the FW Act because it failed to pay three employees their redundancy entitlement upon termination of their employment. The employees’ positions were made redundant after Spotless’ contract with Perth International Airport was not renewed.

Spotless relied on the “ordinary and customary turnover of labour” exception to paying redundancy pay and argued that:

  • It is a feature of its business that it enters into fixed-term contracts with customers;
  • It employs employees to perform work under those contracts; and
  • Where a contract comes to an end or is not renewed, then the jobs performed by employees under the contract come to an end.

The FWO submitted that the exception required consideration of whether the termination of employment as a result of the loss of contracts was a long-standing practice. It submitted that the “practice” of terminating employees at the end of a contract was actually a new practice that Spotless started to use in order to rely on the exception as a normal feature of its business. The FWO argued that previously, Spotless redeployed employees where possible and paid redundancy entitlements if the employees were not required.

In considering whether Spotless was entitled to rely on the exemption in the FW Act, Justice Colvin considered industrial case law relating to “ordinary and customary turnover of labour”.

Colvin J held that “ordinary and customary turnover of labour”, when considered in the context of previous decisions, described a termination of employment “that is a common and usual outcome for anyone working in a job of that kind” and where “it is to be expected that for anyone in that type of job, the employment will not be ongoing”.

In his view, the exception to a redundancy pay entitlement would apply where it is usual practice for the type of job to be terminated rather than be ongoing. It would depend on the facts in each case whether the termination of employment is “inherent” to the type of job.

It was held that Spotless did not demonstrate that the employees’ employment was terminated because it was common for jobs of their nature to be terminated when a contract came to an end. In particular, it was not demonstrated that due to the circumstances of employment, the employees had, or should have, an expectation that the kind of job they performed would end when the contract ended. The employees were not advised that their employment was for a period of time, was dependent on a contract and would end if the contract ended or was lost.

Accordingly, the Court was satisfied that Spotless contravened the FW Act.

 

Lessons for employers

The exception to pay redundancy due to the “ordinary and customary turnover of labour” is now linked to the nature of the job performed rather than any practice of the employer. This is a narrower interpretation that will look at the facts of the employment rather than any business practice of the employer.

Information provided in this blog is not legal advice and should not be relied upon as such. Workplace Law does not accept liability for any loss or damage arising from reliance on the content of this blog, or from links on this website to any external website. Where applicable, liability is limited by a scheme approved under Professional Standards Legislation.

Similar articles

Commission finds termination letter sent to inactive email address was not notification of dismissal

You've got mail!

Given the serious nature of matters such as dismissals, employers should, as far as reasonably practicable, communicate such matters in person to ensure that there is no confusion about when the employee was made aware of any issues with their employment.

Read more...

Fair Work Commission rejects extension of time application after finding that the date of dismissal was made reasonably clear to the employee

Time's Up

The Fair Work Act 2009 (Cth) imposes a strict 21-day time limit for employees to file unfair dismissal applications in the Fair Work Commission. The statutory limit starts from the date the dismissal takes effect.

Read more...

Fair Work Commission finds dismissal was disproportionate to the gravity of an employee’s heat of the moment remark

You’re bacon me crazy

In the unfair dismissal jurisdiction, the primary remedy is reinstatement. This means the employer is ordered to return the employee to their employment in the position they held immediately prior to their dismissal or another position on no less favourable terms.

Read more...

Offers of alternative employment in redundancy cases

An offer you can refuse

In most cases of redundancy, employers have an obligation to consult with affected employees about the proposed redundancy and consider whether or not anything can be done to mitigate or minimise the impact on the employee, such as redeployment or obtaining other acceptable employment for the employee.

Read more...

FWC finds that employee’s employment ended at end of fixed term and was not dismissed

Time goes by so slowly

Access to the unfair dismissal jurisdiction under the Fair Work Act 2009 (Cth) is on the basis that the employee is “dismissed” from the employment. A jurisdictional objectional can be raised if the employee has not been actually dismissed by the employer.

Read more...

Commission finds employer’s suspicion of an employee’s misconduct was not a valid reason for dismissal

Under suspicion

If considering taking disciplinary action due to an employee’s misconduct, it is critical that an employer makes a decision based on wrongdoing as opposed to a mere suspicion of wrongdoing.

Read more...

Let's talk

please contact our directors to discuss how ouR expertise can help your business.

We're here to help

Contact Us
Let Workplace Law become your partner in Workplace Relations.

Signup to receive the latest industry updates with commentary from the Workplace Law team direct to you inbox.