Wondering about the relevance of earlier casual service to redundancy pay?
In a decision on 30 July 2018 the FWC Full Bench has provided some welcome clarification on when an employer will need to include previous casual service for employees who later become entitled to redundancy pay.
The appeal by the employer, Unilever, concerned the question of whether or not the relevant enterprise agreement (EA) required permanent employees who had previously worked on an almost continuous pattern as casual and seasonal workers before transitioning to permanent work were due redundancy pay calculated by reference to the entire period of service.
The employer was successful in arguing that a redundancy pay entitlement under this particular EA need only be calculated by reference to service as a permanent employee. In this sense, it is an outcome that applies only in that workplace and turned on the particular aspects of the EA in question, including factors such as the heading of the relevant section of the EA (which stated it did not apply to casual or seasonal employees) and reference to ‘years’ of service (which did not align with repeated separate casual/seasonal engagements).
In interpreting the Unilever agreement, the Full Bench was asked to consider the idea that casuals might be covered by the relevant terms about redundancy in respect of service but not payment. In dealing with this, the Full Bench observed the conceptual boundary between redundancy and the nature of casual/seasonal work, which inherently entails the possibility of cessation by the employer choosing not to re-engage the employee. In short, if an employer has the choice not to re-engage this type of employee, when would a redundancy ever arise? There would be no need.
However, of broader relevance are the Full Bench’s general comments on earlier casual service and the error made at first instance when dealing with the Unilever dispute. Relevantly:
- Since the 2016 FWC Full Bench decision in Donau (which analysed a similar claim under a differently worded enterprise agreement), there has been an understanding that redundancy pay under the National Employment Standards needs to include previous casual service for a permanent employee later made redundant. For example, the thinking was that an employee working ‘contiguous’ (ie, repeated and close) casual engagements for 2 years before working on a permanent basis for 8 years would be entitled to NES redundancy based on 10 years’ service (not 8).
- In the present case, a different Full Bench has confirmed that Donau turned on its own facts and should not be understood as being generally applicable to considering “service” under the Fair Work Act (as it is defined in section 22) or to service in all enterprise agreements providing for redundancy. This means the thinking above should now be doubted.
Lessons for employers
- While redundancy benefits in enterprise agreements are commonly established by reference to continuous service (ie permanent service only), this is not always the case. You should not automatically assume casual service is excluded and look carefully at the particular language of the EA.
- For employees covered by the NES, it is no longer clear that earlier casual service has to be included when calculating the redundancy pay for a now-permanent employee.
This article was written by Kate Peterson, Executive Counsel at Workdynamic Australia. The information in this article is for information purposes only and does not constitute legal advice. You should obtain specific advice relevant to your circumstances.