Ruling prompts redundancy review

A RECENT Federal Court ruling on redundancy is already having implications for large businesses and their subsidiaries.

The ruling, which required a company to pay redundancy entitlements to employees transferred to its wholly-owned subsidiary, means employers who transfer employees to another company – even if the terms, conditions and job titles are identical – may be liable for redundancy payments.

Amcor Limited was ordered to pay its 800 employees severance pay after a ruling last month found the company contravened its certified agreement when workers were moved to Paper Australia Pty Ltd.

Deacons senior associate workplace relations Leanne Nickels said the case set a precedent and suggested employers review their certified agreements and redundancy policies.

“You need to specifically state that, in a transmission of employment, employees are not entitled to redundancy payouts. You need to anticipate it and put it in,” Ms Nickels said.

She said the test case, Termination, Change and Redundancy in 1984, led to the outcome of a provision not to include redundancy payments if there was a transmission or transfer or business, so long as the employees retain the benefits of the old company. This only applied to some awards, however.

“The idea of redundancy is to compensate an employee because the employer has decided they no longer want that job to be done by anyone, or they are selling the business or there is a restructure,” Ms Nickels said.

“When an employee starts with a new company they lose their accrued sick leave, seniority of the job, and security.

“The belief has been, however, that if there has been a transmission, and everything remains the same for the employees, if they retain all those benefits, then the employer does not have to pay redundancy payments.

“The Termination, Change and Redundancy case didn’t apply across the board … it was included in the award.”

As a result of the case, a proviso was applied to certain awards that stated the company would not pay severance payments in the case of succession, assignment, or transmission of business.

Ms Nickels said that, even though Amcor transmitted its employees and kept all the benefits, a clause in the certified agreement stated that, should a position become redundant and an employee retrenched, the employee was entitled to severance pay, which was three weeks’ pay per year of service.

Ms Nickels said a defence using the meaning of ‘redundancy’ may not get employers out of possible liability and terms needed to be put in place – in writing – to cover the event of a transmission or sale of business.

She said if employers had existing agreements or policies, they needed to put strategies in place before they transmitted or sold their business.

“They need to think about it at the time when they are looking at a transmission or sale,” Ms Nickels said.

“They could look into things like getting their employees to resign from the old company and re-employ them under the new company. That’s an issue that has yet to be ruled upon by the courts.”

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