Employees are often hired for the purpose of performing work under a particular contract, the continuation of which depends on the employer re-winning the contract each time it is open for tender. However, it is often the case that the employer is unsuccessful in the tender process and is therefore left with an oversupply of employees.
For example: A cleaning business successfully wins a contract to provide cleaning services to Westfield Shopping Centre. At the end of the term of the contract, the company is advised that Westfield will not be renewing the contract as a competitor cleaning company has been successful in the tender process. Consequently, some, if not all of the cleaning company’s employees are likely to lose their jobs.
Employees who find themselves in the above scenario often want to know if they are entitled to a redundancy payment.
Section 119 (1) (a) of the Fair Work Act 2009 provides that an employee is entitled to be paid redundancy pay by the employer if the employee’s employment is terminated because the employer no longer requires the job done by the employee to be done by anyone. Where this requirement is met, the exception which dis-entitles the employee to redundancy pay is where the termination of employment is due to the ‘ordinary and customary turnover of labour’.
The question of whether these excess employees in the above scenario are entitled to a redundancy payment therefore rests on the interpretation of what constitutes ‘ordinary and customary turnover of labour’ and the corresponding exception to the obligation to pay out a redundancy.
Whether or not a dismissal is due to the ordinary and customary turnover of labour is dependent on the circumstances of each case. This warrants an assessment of the normal features of the business and whether there was a reasonable expectation of employees that their employment would be ongoing. If that is the case, it is unlikely that employers can rely on the exception.
On appeal, the full bench in Compass Group (Australia) Pty Ltd v National Union of Workers and another [2015] FWCFB 8040 provided that the following factors indicated that the employee was terminated on the grounds of ordinary and customary turnover of labour:
- It was common practice for the employer to dismiss employees following the loss of a contract;
- The idea of an employee being employed to work on a specific contract implies a link between the contract and the employment and the loss of a contract could give rise to dismissal;
- It was longstanding practice of the employer to apply the ‘ordinary and customary turnover of labour’ exception; and
- It was the common intention of the parties to interpret the ‘ordinary and customary turnover of labour’ as applicable to the employee’s employment.
The recent Full Bench in Spotless v Dennis Buckle 2017 WAIRC 00323 9 June 2017 upheld the appellant’s argument that the employee was not entitled to a redundancy payment as his employment was terminated on the grounds of ordinary and customary turnover of labour following the loss of the contract by the appellant to provide services to Fire and Emergency Services.
From the above, it is clear that whether an employee is entitled to a redundancy payment in the loss of contract scenario is dependent on the facts, including what the parties have agreed to from the outset of the employment.
If you find yourself in this situation, we recommend seeking legal advice.