Redundancy ruling may give employers an out

A RECENT decision by the WA Industrial Appeals Court has effectively removed the requirement for employers to pay redundancy in some situations.

While employers are still required to pay severance monies under contractual terms, they are no longer expected to pay money previously deemed as ‘implied in the contract’, according to Elderslie Finance Corporation legal representative, Chamber of Commerce WA Legal Services manager, Geoff Bull.

“Our State [Industrial Relations] Commission over the past few years has decided to find that, although there is no redundancy payment in the contract, it is implied that you should pay an amount,” Mr Bull said.

“Employers are no longer going to have a third party telling them to pay redundancy when it’s not written in the contract.”

Jackson McDonald partner workplace relations team, Greg Smith, said employers still had to be mindful of unfair dismissal laws and contractual issues.

“Employers are still required to give notice, whether in a contract or determined by the commission as reasonable notice ... there is also the obligation to consult under the minimum conditions of employment act,” Mr Smith said.

“Employers must consult with employees about the effects of the redundancy and the measures that can be taken to avoid or minimise them.

“A failure to consult can make the termination unfair. What this decision doesn’t do is allow employers to make people redundant with no consequences. It can still be found to be unfair and employees can be reinstated.”

What the recent case has done is remove the notion of an implied payment of redundancy.

Judge Anderson disagreed with the WA Industrial Relations Commission’s decision to use the 1993 Coles Myer v Coppin case as a benchmark for determining that redundancy clauses were implied in employment contracts.

The WA Industrial Appeals Court also found that actions taken by an employer have weighting when damages are decided upon.

“Any payment outside what the employer is entitled to do can offset what the previous entitlement was. If an employer gives 10 weeks’ pay but no notice, this can be taken into account,” Mr Bull said.

Mr Smith said while this case was important, questions remained unanswered.

“If there is no contractual entitlement to severance pay and there is no implied right to severance pay there is still a question: ‘If I don’t pay it, can it make the dismissal unfair?’,” he said.

“It would still be open to a commissioner to decide if it’s unfair because of the unfair dismissal laws, not the contractual benefits law.

“A lot of companies have redundancy policies that may apply independently of an employee’s contract. If the company has a redundancy policy, does it form part of the employee’s contract? Can some employers, who have introduced these policies because of the implied term, now remove them, or does it become part of the employee contract?”

Mr Smith also said that, although the decision was not binding, it is a strong case for employers.

“Judges give a reason for deciding but will make other comments to the case that are not strictly binding,” Mr Smith said.

“The comments made in this case are not strictly binding but they are highly persuasive.”

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