Efforts not Enough to Avoid Redundancy

Serco Sodexo Defence Services Pty Ltd (SSDS) [2015] FWC 641 (28 January 2015)

When a company lost a contract to a competitor, it thought it could avoid redundancy payments for its employees who effectively transferred across to the new contractor. But the Fair Work Commission had other ideas, finding the company did not “obtain” the work for its employees. Now the company is faced with paying former employees, who got basically their same jobs with the new employer, redundancy pay.

The FWC has adopted the view that an employer will only avoid redundancy pay if that employer had made strenuous efforts and obtained alternative employment.

In this case, FWC used the words of the Fair Work Act literally, saying that since the outgoing contractor did not physically obtain the jobs for these continuing employees with the new contractor, the old employer had therefore made the employees redundant.

This is despite the fact that FWC acknowledged the old employer went “considerably beyond” the limits imposed by legislation to assist the employees get jobs with the new contractor.

The upshot of this is if an employer loses a contract and the employer does not want to see redundancy pay going to employees who will not in reality loose a thing, then the employer has to be very hands on to ensure the employees get placements with the new employer, something that is not always at all feasible. Otherwise, the employer has to pay the redundancy.

The best way to avoid this in the circumstances of losing a contract is to make the employment contracts match the commercial contract so that if the company loses the business at the end of the contract period, the employees are terminated as a result of the fixed term employment, that is, the effluxion of time.