NEW REDUNDANCY ENTITLEMENTS FOR FEDERAL AWARD EMPLOYEES – SOME RELIEF FOR SMALL BUSINESS

Australian Industrial Relations Commission, Justice Guidice, President, Vice President Ross, Commissioners Smith & Deegan, Melbourne, 8 June 2004

Regular readers will recall that we reported in our April bulletin on increases in redundancy entitlements for long term federal award employees. In particular, we noted that the more generous scales would not apply to small businesses employing less than 15 employees. However, the Full Bench determined that the previously existing standard clause of up to a maximum of 8 weeks pay after 4 years service would now apply to small business. The Full Bench has recently handed down a supplementary decision clarifying various aspects of the March decision.

The Australian Chamber of Commerce & Industry (ACCI) contended that service for the calculation of the new severance pay obligation for small business should operate prospectively. It was submitted that it would be unfair to impose a contingent liability in relation to prior service because employers have not had the opportunity to make provision for it.

The AIRC accepted that small business employers may not have the financial reserves necessary to meet a redundancy situation immediately, even though currently trading profitably. Accordingly, the AIRC decided that the severance pay scale to apply to small business should not take into account service rendered prior to the operative date of any order giving effect to the March decision. The AIRC also pointed out that there is an incapacity to pay provision available to businesses which cannot meet the obligations of the new scale which provides employer who cannot afford to pay with an opportunity to seek relief from their severance pay obligations so that such employers do not go out of business simply because of those obligations.

This exemption does not apply to businesses employing more than 15 employees and the redundancy entitlements for employees of these businesses will operate retrospectively.

HONESTY DEFINITELY IS THE BEST POLICY

John Dickinson and Brett Young AND Carter Holt Harvey Wood Products Australia Pty Ltd trading as CHH Pinepanels, Queensland Industrial Relations Commission, Deputy President Bloomfield, 24 May 2004

Regular readers will also recall that our April Workplace Bulletin reported on this decision in which the QIRC upheld the termination of 2 employees where their dishonesty in responding to allegations in disciplinary proceedings had been established. The employees left the site without any concern for their fellow workers and abused the significant degree of autonomy and responsibility accorded to them, posing considerable additional risks to the safe operations of the plant. The employees had compounded the problem by not being truthful when confronted with the allegations and made things even worse by continuing to stick to a story which did not stand up to scrutiny up to and including the hearing of their unfair dismissal applications.

The virtues of honesty, even in the face of misconduct, have been emphasised by a supplementary decision in which costs of $12 000 were awarded against the 2 employees. Whilst costs had been sought against the Australian Workers Union which represented the workers in their cases, the Deputy President ruled that the AWU had been merely acting as their agent rather than a party in its own right and there was no basis for a costs order against the union.

Costs were claimed against the employees of $60 593.33 being the employer’s professional costs and outlays in defending the applications. The Deputy President considered that the employees’ unreasonable behaviour had caused:

• the trial to be extended from 1 to 3 days;

• the employer to brief counsel rather than a solicitor as it had intended for the trial;

• the employer to incur considerable additional cost associated with the production and leading of evidence from relevant employees and management representatives.

The Deputy President took into account the current financial predicament of the employees in that they had recently lost their jobs and were attempting to re-build their lives in determining to award an amount of $12 000 rather than the higher amount sought. He did note that even with this order, the employer would still finish up paying more costs than had been awarded in circumstances where it should never have been forced to incur those costs.

INCREASES IN REDUNDANCY ENTITLEMENTS FOR LONG TERM FEDERAL AWARD EMPLOYEES – CASUALS MISS OUT – SMALL BUSINESS ROPED IN

Australian Industrial Relations Commission, Justice Giudice, President, Vice President Ross, Commissioners Smith & Deegan, Melbourne, 26 March 004

Our September 2003 Workplace Bulletin reported on the recent decision of the Queensland Industrial Relations Commission to enhance severance pay standards for state award workers. A Full Bench of the Australian Industrial Relations Commission has now largely implemented these changes at a federal level. A number of unions had brought award severance provisions before the Full Bench for review and employer groups made counterclaims.

In its decision, the Full Bench of the AIRC was of the view that the current 4 year scale provisions do not adequately take into account the effect of redundancy on employees with more than 4 years service and in particular the increased trauma associated with termination of employment, loss of seniority and loss of non-transferable credits in those circumstances. Unlike the new Queensland scale however, the Full Bench has limited the federal severance pay scale to 10 years service. The current standard for severance payments for federal award employees is:

Period of Continuous Service Severance Pay Entitlement

Less than 1 year Nil

More than 1 but less than 2 years 4 weeks’ pay

More than 2 but less than 3 years 6 weeks’ pay

More than 3 but less than 4 years 7 weeks’ pay

More than 4 years 8 weeks’ pay

The Full Bench determined that the following scale was now appropriate:

Period of Continuous Service Severance Pay Entitlement

Less than 1 year Nil

1 year and less than 2 years 4 weeks’ pay

2 years and less than 3 years 6 weeks’ pay

3 years and less than 4 years 7 weeks’ pay

4 years and less than 5 years 8 weeks’ pay

5 years and less than 6 years 10 weeks’ pay

6 years and less than 7 years 11 weeks’ pay

7 years and less than 8 years 13 weeks’ pay

8 and less than 9 years 14 weeks’ pay

9 years and less than 10 years 16 weeks’ pay

More than 10 years 12 weeks’ pay

The scale is more generous than the state scale for those employees of between 5 and 10 years service. However, unlike the state scale, employees of more than 10 years service have their redundancy entitlement capped at 12 weeks. The reasoning of the Full Bench was that federal long service leave provisions by which employees of greater than 10 years service are entitled to pro rata payment of long service leave upon termination meant that there would be “double dipping” unless there was a cap. The Full Bench rejected the unions’ application for severance pay to extend to casuals.

The Full Bench also decided that these increased provisions should not apply to federal award employees in small businesses employing fewer than 15 employees. However, it determined that small business should now be subject to the previously existing standard clause of up to a maximum of 8 weeks pay after 4 years of service. This creates a significant point of difference between federal and state award employees.

The Full Bench has fixed 23 April as the date for commencement of the new TCR provisions for those federal awards which were part of the test case proceedings. Whilst the decision applies only to a small number of awards, it is expected that flow on applications for the new provisions to apply to all federal awards will occur over the coming months.

BUSINESSES NEED TO BE CLEAR IN CONTRACTOR ARRANGEMENTS

Jamie Mould AND FCL Interstate Transport Services Pty Ltd, Queensland IRC, Commissioner Bechly, 9 March 2003

This case illustrates the increasing blurring of lines between contractual and employment relationships, the need for principals to have clear contracts and monitor ongoing relations with contractors and reinforces that contractual arrangements cannot be used to pay less than equivalent award rates to contractors. Mr Mould had worked for some years up to 1996 for FCL as an employed forklift driver. He subsequently purchased a truck and offered his services as a contractor. The contract was a verbal one. There were allegations of a subsequent lack of good faith in dealings by both parties. However, these were not decisive to the result in the case.

The Commissioner compared Mr Mould’s earnings over the 4 years with the basic weekly award entitlements of a similar employee. Having determined that the State Award provided a basis for comparison to assist in determining the fairness of the contract, the Commissioner considered the substantial difference in comparative earnings rendered the contract unfair. The Commissioner took into account Mr Mould’s actions in entering the contract, the limited control of the respondent over hours worked and the benefits derived by Mr Mould during the time and fixed a global sum of $58 000 to compensate Mr Mould for the overall unfairness of the contract, a not insignificant sum.