Avoiding redundancy payments: Not easy and not recommended
The CaseUnited Voice v Berkeley Challenge Pty Limited
Berkeley Challenge Pty Limited (Berkeley) supplied employees to its related entity which had a contract with Lend Lease. The employees undertook cleaning, security and related services at the Sunshine Coast Plaza Shopping Centre. When the Spotless Group purchased Berkeley, another company in the Spotless group took over the contract with Lend Lease. However, Berkeley continued to provide employees to that entity.
When Spotless lost the contract with Lend Lease, Berkeley terminated the employees’ employment. Berkeley claimed it was not required to provide the employees with redundancy pay as the employees’ employment had come to an end through the ordinary and customary turnover of labour.
The United Voice union commenced proceedings in the Federal Court on behalf of the terminated employees claiming Berkeley had not:
- properly provided the employees with notice of termination pursuant to section 117 of the Fair Work Act 2009 (Cth) (FW Act); and
- paid the employees redundancy pay in accordance with section 119 of the FW Act.
The Federal Court held that Berkeley had not provided the employees with proper notice. The letter to the employees was headed “Notice to exit the contract” and did not specify an actual date of termination of the employees’ employment but simply indicated that employment termination was a possibility if no alternate suitable position was found. As such, Berkeley was found to have breached the notice requirements under the FW Act.
The Court also found that Berkeley was required to pay the employees redundancy pay and that the exception of ordinary and customary turnover of labour could not be used. To be successful in this argument, the Court held that Berkeley had to show that its turnover of labour was “…both common, or usual, and a matter of long-continued practice”.
The Court found that the employment terminations were uncommon and extraordinary and not a matter of long-continued practice. This was supported by the fact that in a 20-year contract period with Lend Lease, Berkeley had staff with service between 4 and 21 years.
It is very important when issuing a notice of termination of employment that you unambiguously state the date of the cessation of the contract.
If you wish to rely on the ordinary and customary turnover of labour exception to avoid paying redundancy pay, you need to show that your labour turnover on that contract is frequent or usual and a matter of long-continued practice.
Please note: Case law is reported as correct and current at time of publishing. Be aware that cases in lower courts may be appealed and decisions subsequently overturned.
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