The case of Serco Sodexo Defence Services Pty Ltd[2015] FWC 641 (‘SSDS’) has highlighted the issue of “obtaining” acceptable alternative employment.

The Fair Work Commission (‘FWC’) in a series of recent determinations refused to grant applications under the Fair Work Act 2009 (Cth) (‘the Act’) by SSDS to reduce its substantial redundancy pay obligations. The FWC found that the employer had failed “to obtain” other acceptable employment for its redundant employees despite the fact that the majority of employees had secured alternative employment.

In the SSDS case a significant number of employees were made redundant due to the loss of several defence contracts and SSDS applied for orders in respect of its NSW and ACT, Northern Territory/Kimberley and Queensland employees to reduce its redundancy pay liabilities.  This Workplace Update looks at the decision in respect of the NSW/ACT employees which was the subject of the SSDS case. Commissioner Roe noted that this case was unique in that it was the first case in which applications had been brought in respect of a very large number of employees. Despite this Commissioner Roe noted that SSDS would need to show that it obtained employment for each of the employees. Ultimately SSDS failed and the FWC dismissed its applications to vary or exempt its redundancy pay obligations.

SSDS Submissions

SSDS argued that its actions caused the job opportunities to become available to each of the employees who received a job offer from an incoming contractor and that the appropriate inquiry in considering what action caused the employment to become available to the redundant employee is “… what steps, if any, did the current employer take to identify an opportunity of alternative employment, bring it to the attention of the redundant employee and maximise the prospect of the redundant employee gaining such employment? Further, did any of those steps have a material influence on the redundant employee being offered a job?”

Test Applied by Commissioner Roe

The FWC applied the Full Bench case of Maritime Union of Australia v FBIS International Protective Services (Aust) Pty Ltd [2014] FWCFB 6737 and said that the test for “obtaining” acceptable alternative employment is where an employer’s actions:

  • cause the acceptable alternative employment to become available to the redundant employee; and
  • are a ‘strong moving force’ towards the job offer being made.

 
Commissioner Roe noted that it is not sufficient that the employer’s actions had a material influence over the job offer being made. Commissioner Roe added that there must be a causal link between the purpose and effort of the employer and the employee gaining employment or the employee receiving an offer of employment.

What actions did SSDS undertake?

It was noted that SSDS had gone to considerable effort and expense to assist its employees and it was well beyond what they were obliged to do under the consultation provisions of the relevant agreements. SSDS gave evidence that it assisted employees to secure employment by:

  • informing employees about the loss of contracts, the incoming contractors and positions available with them, the recruitment process of the incoming contractors and resume and interview techniques;
  • facilitating (including during work hours) the scheduling of information sessions, interviews and/or medical assessments required by the incoming contractors;
  • encouraging employees to apply for relevant positions with the incoming contractors;
  • assisting employees with lodging applications online;
  • assisting employees to upgrade their security clearances to make them eligible for certain positions with the incoming contractors; and
  • providing the incoming contractors with information to assist them with the recruitment process.

 
Why the SSDS actions were considered insufficient by Commissioner Roe?

Commissioner Roe noted that …”the actions of SSDS to inform employees, to assist employees to participate in the recruitment process of the incoming contractors and to improve the chances of SSDS employees being successful in that recruitment process, fell well short of action which “causes acceptable alternative  employment to become available” to each of the redundant employees and do not establish that SSDS was a “strong moving force towards the creation of the available opportunity” for each of the SSDS employees.”

Commissioner Roe found that “SSDS did not reach agreement with any of the incoming contractors that any SSDS employee or any group of SSDS employees would be guaranteed a position with the incoming contractor. Each of the incoming contractors ran their own recruitment process. Generally this meant that some SSDS employees who sought employment with a particular incoming contractor were successful and some were unsuccessful. Internal and external applicants were considered on merit using the same selection criteria and the same process.”

The FWC placed great emphasis on the fact that the SSDS employees were required to compete in a selection process with incoming contractors. The “strong moving forces” towards the creation of a job offer were the actions of the candidate and the incoming contractor, not the current employer.

Finally Commissioner Roe found that …”to some extent SSDS sought to maximise the appearance of cooperation in order to strengthen their case to reduce redundancy pay and the language used in the SSDS notes and communications should be considered in that context.”

What will satisfy the test?

Commissioner Roe gave a number of non-exhaustive examples of where an employer might be able to demonstrate that it had obtained acceptable alternative employment for its employees, noting that it would be dependent on the circumstances at hand:

  • where the outgoing employer approaches the incoming employer and secures agreement to employ an employee or group of employees without the need for a selection process;
  • where the outgoing employer provides information about the job opportunity to the employee which the employee would not have otherwise obtained; or
  • where the outgoing employer provides assistance to the employee and/or reaches agreement with the incoming employer which causes the offer of employment to be made or was a strong moving force towards the offer of employment.

 
What is “other acceptable employment”?

Given that the FWC did not find that the employer obtained employment for its employees it was not necessary for the Commission to consider whether the alternative employment was “acceptable”. However Commissioner Roe did note that this question would need to be determined by taking into account numerous factors including wages and condition of the new role (such as leave entitlements, breaks, bonuses and allowances), work status and location, hours of work, level of job security and continuity of service.

The FWC found that if prior service was not recognised by the incoming employer that loss to the employee should be compensated and in these circumstances the redundancy pay liability could not be reduced to nil even if the alternative employment is deemed to be acceptable.

Conclusion

An employer looking to be eligible for a redundancy pay exemption or variation needs to take positive steps to secure employment for redundant employees, which means the employer’s actions cause the employment to become available and the employer is a strong moving force towards the creation of the new job opportunity. This may involve the outgoing employer reaching an agreement with the incoming employer that it will employ the redundant employee or group of employees without the need for a competitive selection process, providing an incentive to the incoming employer to employ the redundant employee or group of employees or providing information about the job opportunity to the redundant employee which they would not have otherwise been able to obtain.

As the SSDS case shows the threshold that the employer must meet is quite high to ensure that without good reason an employee’s entitlement to redundancy pay is not reduced or eliminated completely.

If you have any questions about this case or redundancy generally please contact Michael Bishop or Amelita Hensman of our office.

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