No 'ordinary and customary turnover in labour' where there is a reasonable expectation of ongoing work

In brief 1 min read

An employee's reasonable expectation of continued employment is relevant to determining whether the termination was 'due to the ordinary and customary turnover of labour' for the purpose of exemption from statutory redundancy entitlements.

Key takeaways

• Employers that rely on the continuity of particular contracts with their customers in order to maintain their workforce should set clear expectations with their employees that their employment is dependent on the maintenance of those contracts.
• In particular, an employment contract in that scenario should expressly state that it is conditional on the continuity of the relevant client contract.

Background

Berkeley Challenge Pty Ltd provided security and cleaning services at a shopping centre under a series of contracts. Berkeley was acquired by the Spotless Group but still continued to service the same shopping centre. After more than 20 years, the shopping centre terminated its contract with Berkeley. Berkeley then terminated the employment of 21 employees in connection with the loss of the contract. It did not give them redundancy pay, on the basis that an exemption applied as the redundancies were 'due to the ordinary and customary turnover of labour'.

United Voice brought proceedings against Berkeley and Spotless on behalf of the terminated employees for failing to pay their redundancy entitlements. The Federal Court found in favour of the employees.¹

The decision

On appeal, the Full Federal Court decided that Berkeley and Spotless were not exempt from giving redundancy pay.² This was because:

• The 'ordinary and customary turnover of labour' exemption applies when it is clear that the nature of the work the relevant employees performed is not ongoing. This might be due to the nature of the job itself or because it was a normal feature of a particular kind of business. This requires an examination of the facts of each case.
• One relevant factor is the reasonable expectation of the employee in relation to their ongoing employment. Such expectation may arise from the nature of the work that the employee was employed to do, the circumstances in which they came to be employed or the circumstances in which their employment continued;
• The employees in this case were employed permanently for between four to 21 years on the same client contract. Their employment contracts did not specify that their employment was dependent on a client contract and there was minimal turnover of labour at Berkeley.
• There was no evidence that the employees knew of Spotless's practices of terminating employees when external contracts were lost, which meant that this could not inform their expectations.

These factors created a reasonable expectation on the part of the employees that their employment would be ongoing and that they were entitled to redundancy pay.