Employers faced with making a number of their employees redundant should always consider whether they can “obtain” other acceptable employment for their employees in order to minimise (or reduce to nil) their redundancy pay obligations.
An employer recently faced with this circumstance was Serco Sodexo Defence Services Pty Ltd (SSDS). As a result of losing a number of substantial contracts, SSDS made hundreds of its employees redundant and applied to the Fair Work Commission (Commission) under section 120 of the Fair Work Act to reduce its redundancy pay obligations. The basis of SSDS’ application was its argument that it had obtained other acceptable employment for its NSW and ACT redundant employees with a number of different employers.
In order for SSDS to succeed, it needed to establish that it was a “strong moving force” towards the creation of job opportunities for its employees. Commissioner Roe said this meant that “there must be a causal connection between the purpose and effort of the employer and the gaining of employment or an offer of employment, by the employee“.
SSDS argued it had met the section 120 test entitling it to a reduction in redundancy pay by undertaking a number of actions including:
- facilitating communication with employees about information sessions to be held by the new employers and allowing some employees time off work to attend those sessions;
- assisting with the scheduling of some interviews and medical assessments and allowing the release of some employees to attend in working time;
- distributing forms and collecting some completed applications and forwarding them to the new employers;
- providing general information and links to supportive information to assist in completing applications, resume writing and interview techniques;
- providing information about security clearances to some of the new employers and providing application forms to employees to upgrade their security clearances to meet new requirements;
- permitting employees access to SSDS computers to submit and draft applications and resumes.
While accepting that SSDS had expended “considerable resources to assist its employees“, Commissioner Roe rejected the application covering the majority of the NSW/ACT employees. He has allowed SSDS a further opportunity to convince him that it had obtained employment with one security company for a group of its security workers because there was a formal agreement between SSDS and the new employer to give SSDS employees preferential treatment.
In rejecting the application concerning the majority of the NSW/ACT employees, Commissioner Roe found that SSDS was not a “strong moving force” towards the creation of job opportunities for its redundant employees. This was because SSDS did not reach an agreement with any of the new employers that its employees would be guaranteed a new job; each new employer ran their own recruitment process whereby internal and external applicants were considered on merit using the same selection criteria and the same process; SSDS employees were not given preferential treatment; and the employees would likely have been employed even if SSDS had not assisted with their applications.
Accordingly, SSDS was required to pay these employees their full redundancy entitlements.
A copy of Commissioner Roe’s decision can be accessed by pressing this link.
Tips for Employers
This case provides a timely reminder to employers that they are not entitled to simply refuse to pay redundancy pay to their employees in circumstances where they have found a new job for them. Employers need to remember that they are subject to an obligation to apply to the Commission and produce appropriate evidence to establish that not only did they take the necessary steps to “obtain” the new employment, but that new employment constitutes “other acceptable employment”.
In order to maximise the prospects of an employer establishing that they were the “strong motiving force” behind the employee obtaining the new employment, employers should:
- go beyond what they are obliged to do under the consultation provisions of the relevant agreements or awards and go beyond their obligations to provide time off during the notice period for job search;
- endeavour to reach a written agreement with the new employer (that agreement should guarantee the employees a new job without imposing on them a competitive selection process, and include incentives to the new employer to maximise the engagement of employees);
- document all the activities they take to secure the other employment for the employee.