A Full Court of the Federal Court has adopted a simpler test for determining whether an outgoing employer has “obtained” acceptable alternative employment for redundant employees and ought to have their redundancy pay obligations reduced under section 120 of the Fair Work Act 2009 (FW Act).

Before this case, the position typically adopted was that the actions of an employer in “obtaining” acceptable alternative employment for redundant employees needed to be a “strong, moving force towards the creation of the available opportunity”. The Full Court rejected this approach on the basis that it introduces unnecessary complications into the connotation of the word “obtain”. The Full Court preferred to apply the general connotation of “to acquire, get” in answering the question of whether an employer has obtained other employment for an employee.

Implications for employers

The decision should provide some assurance to employers, particularly in “change of contractor” situations, that relief from redundancy pay obligations under section 120 of the FW Act is not unreasonably hard to get. The decision clarifies what an employer needs to do to successfully demonstrate that it has obtained acceptable alternative employment for its employees. This must involve something more than, for example, simply providing the contact details of employees to the incoming contractor/employer to facilitate access to the recruitment process.

Background

In October last year, FBIS International Protective Services (Aust) Pty Ltd (FBIS) lost its tender to secure a new contract with Asciano Executive Services Pty Ltd to supply security services at its stevedoring facilities. AGC National Pty Ltd (ACG) won the new tender and offered 49 FBIS employees new employment with ACG. All employees accepted employment with ACG which, aside from one employee, was in the same position and on the same terms and conditions.

FBIS applied to the Fair Work Commission under section 120 of the FW Act to have FBIS’ redundancy pay obligations reduced, because it had obtained other acceptable employment for those employees.

Decision at first instance

The Commission found that FBIS had taken a number of steps to facilitate the 49 employees securing employment with ACG as the incoming contractor. This included having discussions with representatives of ACG about the employees’ future engagement by ACG, providing ACG with the employees’ contact details and information about their employment under the company’s enterprise agreement, and providing advice about the wages and entitlements that FBIS had paid to the employees. FBIS also tried, unsuccessfully, to facilitate meetings between ACG and the employees, and to reach a commercial agreement with ACG on the employees’ accrued leave entitlements and service.

The Commission was satisfied that FBIS had done enough to “obtain” alternative employment for the employees and meet the section 120 requirements. FBIS was relieved from making redundancy payments to 48 of the employees and halved the redundancy pay for the other employee (who had been employed by AGC in a lower position).

The Maritime Union of Australia appealed against the decision and orders.

Decision of the Full Bench of the Commission

A Full Bench of the Fair Work Commission upheld the appeal and overturned the Commissioner’s orders, finding that the action taken by FBIS to help the employees obtain employment with AGC fell short of the section 120 obligations. The Full Bench observed that the action by FBIS to facilitate contact between its employees and ACG “did no more than to secure the employees an opportunity to enter the recruitment process of ACG which may or may not have resulted in an offer of employment”. In doing so, the Full Bench noted that FBIS had no knowledge of which employees had been offered employment by ACG or of the terms of any offer.

Referring to previous case authorities, the Full Bench found that the actions of FBIS fell well short of action which “causes acceptable alternative employment to become available to the redundant employee” and the Respondent was not a “strong, moving force towards the creation of the available opportunity”.

FBIS then made an application to the Federal Court, seeking mandamus and certiorari in relation to the decision of the Full Bench.

Decision of the Full Court of the Federal Court

The Full Court dismissed the application, finding that FBIS did not do enough to obtain acceptable alternative employment for the employees. However in reaching this conclusion, the Full Court rejected the notion that the employer needed to be a “strong, moving force towards the creation of the available opportunity” to demonstrate that it had “obtained” the alternative employment.

While the Full Court recognised that the employment with ACG was acceptable, the Full Court could not find that FBIS obtained that employment for those employees. While FBIS may have facilitated the opportunity for the employees to apply for employment with ACG, “what it obtained for them was something less than offers of employment which they could accept or decline as a matter of choice”.

In response to FBIS’ contention that upholding the Full Bench’s decision would place section 120 out of reach of employers in any “change of contractor” situation, the Full Court stated that FBIS’s application failed because of the limited nature of what it had been able to obtain for the 49 employees, not because the bar set by section 120 was too high.

FBIS International Protective Services (Aust) Pty Ltd v Maritime Union of Australia [2015] FCAFC 90 (26 June 2015)