A recent decision of the Fair Work Commission regarding redundancy entitlements could have some unfortunate consequences for employees and, in my opinion, in the long term for business and the economy. In Compass Group (Australia) Pty Ltd  v National Union of Workers; United Firefighters’ Union of Australia [2015] FWCFB 8040 the Full Bench of the Commission held that a group of employees on fixed term contracts were not entitled to severance payments even though the employees had been in many case engaged on a series of fixed term contracts for a number of years. The employees all were involved in providing catering and hospitality services to the Department of Defence as part of a contract between Compass Group and the Department.  The employer concerned had a regular practice of terminating the employment of employees when a contract of the employer’s ended. Because of this regular practice the Commission held (and this is probably strictly correct at law) that the terminations were the “ordinary and customary turnover of labour” for that employer and no redundancy benefits were payable.

Under the redundancy provisions in the National Employment Standards redundancy payments are not required when a termination is a result of the “ordinary and customary turnover of labour”.

A direct consequence of this decision is likely to be that that some employers will be encouraged to have high turnover of labour, use fixed term and casual arrangements even more than is currently the case. This will jeopardise an already vulnerable group of employees.

Unfortunately, as managers are often rewarded for short term financial targets with little regard to long term benefits, many managers will be encouraged to embrace this short term cost saving without regard for the long terms interests of any employer in developing a skilled and loyal work force. It also impact the commitment of many the employees (who have no reason to believe a position will continue).

In my opinion the government should consider responding to this decision by amending the National Employment Standards so that only genuinely short term fixed contacts and casual employees (who have received casual loading) are excluded form the right to redundancy payments if their employment ends in circumstances of redundancy.

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Helen Carter

Helen has practised exclusively in employment and industrial law for over ten years and founded PCC Lawyers in 2010, having previously a partner of a leading Australian specialist workplace relations firm. She is an accredited specialist in Employment Law by the Law Society of New South Wales. Helen is a working mother who is committed to equal opportunities at work. She is a passionate sports fan, particularly in relation to NRL. Both of these are strong themes of this blog. Contact her here.

1 Comment

  1. Thanks for this article and for the link to this case, I hadn’t seen it.

    I have to say that it seems counter-intuitive to regard an employee losing their job after over six years of employment as being part of “ordinary and customary turnover of labour”. While I agree this may be ‘strictly’ correct at law, it seems like a highly formalistic approach from the Commission.

    How far can we take this reasoning? Certainly redundancy is becoming an ‘ordinary and customary’ part of the modern business community. How long before redundancy becomes an exemption to itself? Nobody will be entitled to anything at all…..

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