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Employment & Safety

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Focus: Employment & Safety

5 June 2017

In this issue: we consider redundancy payments when employees are not offered suitable alternative roles; whether payroll providers can be liable as an accessory when a client breaches modern award conditions; and whether employers should consider voluntary job swaps before dismissing employees whose positions have become redundant.

Redundancy pay for employee not offered suitable alternative role

In brief: An employee has been awarded a substantial redundancy payment by the Federal Circuit Court because his employer did not offer him suitable alternative work. Associate Victoria Eastwood reports.

 
 

How does it affect you?

  • Employers should avoid including generous redundancy entitlements in employment contracts.
  • Documenting your reasons for terminating an employee will assist in defending any general protections claim brought by the employee, because it allows the decision-maker to give clear evidence about the reason for termination.


Background

Mr Barbieri was employed by CMP Controls from November 1994 until April 2016. His employment contract provided that if his position was made redundant he was entitled to:

  • two months' payment in lieu of notice;
  • four weeks' severance pay for each completed year of service; and
  • sick leave capped at 60 days.

At the date of termination, Mr Barbieri had been employed by CMP for 22 years.

In 2014, Mr Barbieri became underutilised in his role as senior buyer. He took on extra office duties. In 2015, he complained about the amount of overtime he was doing. In response, he was offered a job with CMP in New Zealand, which he declined. In April 2016, CMP proposed to alter Mr Barbieri's duties to include more manual labour. These duties would have required Mr Barbieri to obtain a forklift licence. He declined to undertake the new duties on the basis that they were not in his area of career expertise. Following several more meetings, Mr Barbieri’s employment was terminated without notice.

Mr Barbieri alleged that he was entitled to redundancy pay. He further claimed that CMP had breached the general protections provisions in the Fair Work Act by dismissing him because he made complaints in relation to his employment and/or because he took parental leave and sick leave.

Decision

The court concluded that CMP did not breach the general protections provisions. There was no evidence that Mr Barbieri was dismissed because he took either parental leave or sick leave. The court accepted the evidence of the decision maker, Mr Andonovski, that Mr Barbieri was not dismissed because he complained about not wishing to undertake manual labour, but because he would not do the manual labour.

However, the court agreed that Mr Barbieri was entitled to redundancy pay of $138,498.42 under his employment contract. The evidence demonstrated that there was not enough work to occupy Mr Barbieri in his position as senior buyer. This was the reason that CMP wanted him to undertake manual labour. In those circumstances, his position as senior buyer was redundant.

Under the contract, CMP could avoid the obligation to make a redundancy payment by offering him an alternative position. The court concluded that CMP did not do so, because the duties offered to him were not within an acceptable range of what he was employed to do

 

Payroll provider an accessory to underpayment breaches

In brief: The Federal Circuit Court has decided that a payroll provider was liable as an accessory to its client's multiple breaches of modern award conditions, including a failure to pay minimum hourly rates. Associate Tegan Ayling reports.

 
 

How does it affect you?

  • External service providers can be accessories to their clients' breaches of the Fair Work Act.
  • Employee underpayment issues continue to be under the spotlight.
  • Employers that rely on external payroll support should ensure they use reputable providers.

Background

Blue Impression Pty Ltd operates a Japanese fast food chain in Victoria. In 2014, the Fair Work Ombudsman audited one of Blue Impression's restaurants and identified that it was underpaying its employees. Blue Impression asked its payroll service provider, Ezy Accounting 123 Pty Ltd, to help fix the problem. Mr Lau was Ezy's director.

The Ombudsman then received a further underpayment claim by a casual employee, Mr Zheng, at another of Blue Impression's restaurants. After an investigation, Blue Impression admitted that it had underpaid Mr Zheng. The Federal Circuit Court was asked to decide whether Ezy was liable as an accessory for its involvement in the underpayments, and so also breached the Fair Work Act.

Decision

The court decided that Ezy was involved in underpaying Mr Zheng and so was liable as an accessory to Blue Impression's breaches.

Ezy argued that:

  • it only provided book keeping services based on the details it received from Blue Impression about the hours worked by employees, their hourly rate and their total pay;
  • it was not its job to make sure Blue Impression was paying its employees correctly; and
  • it did not know any specific details about Mr Zheng, so it could not be involved in his underpayment.

However, Ezy's payroll system included Mr Zheng's hourly rates and produced his payroll records and pay slips. In addition, because of Mr Lau's involvement in the 2014 audit:

  • he knew Blue Impression had not been paying its employees correctly in 2014 and was still doing so while Mr Zheng was employed;
  • he had received detailed information about the 2014 underpayments from the Ombudsman and Blue Impression's lawyers; and
  • he knew the modern award applied to Blue Impression's employees, that the pay rates in Ezy's system did not allow those employees to be paid correctly and that they would continue to be underpaid if the system was not updated.

The court concluded that Ezy, through Mr Lau, should have known that the modern award applied to Mr Zheng's employment, the hours he worked and that he was paid a flat rate without penalties, loadings or allowances. Ezy knew the circumstances were suspicious, but failed to ask questions. It also knew that its system would continue to underpay employees unless it was updated. As a result, Ezy was involved in several of the Blue Impression's underpayment breaches and was liable as an accessory.

Failure to consider voluntary job swaps undermines genuine redundancies

In brief: The Full Bench of the Fair Work Commission has decided that an employer should have considered the potential for voluntary job swaps before dismissing employees whose positions had become redundant. Senior Associate Sikeli Ratu and Lawyer Tom Kavanagh report.

 
 

How does it affect you?

  • Employers do not necessarily need to allow an employee whose position is redundant to 'swap' places with another employee who wishes to volunteer for redundancy.
  • However, there is a risk that a dismissal will not be a 'genuine redundancy' if an employer does not consider swaps where it would have been reasonable in all the circumstances to do so.

Background

A number of employees working as locomotive drivers for a major freight logistics company were retrenched after their positions became redundant. The employer followed a redeployment process for the affected employees, engaged in consultation and provided the affected employees with information about internal transfer opportunities. Despite these steps, some employees made unfair dismissal applications. The employer argued that the dismissals were genuine redundancies and so the unfair dismissal rules did not apply.

The retrenched employees argued before the Full Bench of the Fair Work Commission that for the dismissals to be 'genuine redundancies', the employer was required to consider potential voluntary job swaps before dismissing them. The employer had not considered such job swaps.

Decision

A dismissal can only be a 'genuine redundancy' under the Fair Work Act if it would not have been 'reasonable in all the circumstances' to redeploy the affected employee. The Full Bench confirmed that this requires employers to explore a range of redeployment options.
Looking at 'all the circumstances' of this case, the Full Bench decided that it would have been reasonable for the employer to consider voluntary job swaps. This was because:

  • the employer was a large business employing a significant number of employees performing the same role as those employees being retrenched;
  • if employees were allowed to swap with others performing similar roles, the swap process would not place onerous training requirements on the employer;
  • in some cases, swaps may have been available in nearby locations, so the employer would not have been exposed to significant transfer costs;
  • the employer had previously allowed swaps in similar circumstances; and
  • the employer had suggested swaps as a possible option to mitigate the effects of redundancy in the round of redundancies that resulted in the dismissal of the employees.

Given these circumstances, the Full Bench decided that the failure to consider the possibility of swaps meant that the employer had not complied with its statutory redeployment obligations. As a result, the dismissals of the seven employees were not genuine redundancies. The Fair Work Commission will now consider whether the dismissals were unfair.

 

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