There is increasingly an expectation amongst employees that they
will be paid a lump sum – over and above pay in lieu of
notice and any leave entitlements – when their role in the
company has been terminated (other than for issues of
In the past, this right was limited to award employees or those
under various company schemes, but with the introduction of the
Fair Work Act in 2010, the payment of redundancy became a universal
right in such circumstances.
In previous articles, I have discussed when a redundancy arises.
It arises where the job the person was doing no longer needs to be
done. This usually is because it is either outsourced or staff
numbers are cut and the duties involved in that role are shared
equally amongst other staff. It may just be that the company ceases
to make that line of product or provide that service. A final
situation may be that a business unit is sold.
IN SUCH CIRCUMSTANCES DO ALL EMPLOYEES GET PAID
The answer – like so much in law – is yes and no.
Employers are not obliged to pay redundancy in some specific
Where they have fourteen or less employees at the time of the
Where the company is sold, the employees are taken on and their
prior service is recognised by the new employer
Where they are on a fixed term contract that has expired
Where they are casual
There is a further exception which is available to the employer
to the Fair Work Commission where an employer can argue that they
were proactive in finding new roles for the employees and therefore
should be excused from paying redundancy.
THE QUESTION IS HOW PROACTIVE YOU HAVE TO BE?
In a recent decision of the Full Bench of the Federal Court, the
Court considered the circumstances of a company that had lost a
The contract had gone out to tender again and a new tenderer had
been successful. In that case, the employer took some steps to put
the employees in contact with the new tenderer and 49 of the staff
were successful in finding such a role. However, the new tenderer
didn't recognise prior service with the employer. The question
was whether the actions of the employer were significant enough as
to allow them to be exempted from the payment of redundancy. The
Court – controversially – found against the company and
required them to pay redundancy to their staff (even though they
had new roles).
Unfortunately, the Full Bench of the Federal Court didn't
make any effort to set out what sort of steps it would expect the
company to take.
The Courts seemed to distinguish between merely creating an
opportunity and taking steps to actually secure employment with the
The Full Bench assured us that they weren't setting too high
a bar. I am not certain so sure. The difficulty with their decision
is that it further encourages employers to look closely at
permanent casual arrangements to avoid such liabilities and in some
respects it diminishes the incentive on employers to take any steps
at all unless they are certain that they have the full cooperation
of the potential new employer – that is not always easy to
We would recommend that you do more than just contact the
perspective employer. Rather, we suggest you work collaboratively
with their HR or management to secure interviews for your staff,
that you assist the staff with preparation of CV's. It may be
timely that you organise for some of those interviews to occur on
For further information on employment law, please
An employee that refused a reasonable offer of settlement was ordered by the FWC to pay his ex-employer's legal costs.
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