In a recent case, Christmas came early for a number of employees when they received redundancy payments from their outgoing employer “SSDS”, despite obtaining substantially similar employment from an incoming contractor after the Australian Defence Force (“ADF”) decided not to renew a number of their contracts with SSDS.

The Facts

In 2012 SSDS a specialist service provider to the ADF lost five of its six contracts with the ADF. As a result of the loss of contracts a number of SSDS’ employees positon were identified as redundant and accordingly SSDS took a number of steps to assist affected employees in gaining employment with the incoming contractors. These steps included:

• informing employees about other contractors, advertising available positions and encouraging them to apply;
• allowing employees to attend information sessions with incoming contractors during work hours and in some cases allowing these sessions to be conducted on site;
• providing assistance to employees with their applications and online submissions as well as submitting applications to contractors on behalf of the employees;
• assisting in scheduling job interviews and medical assessments and allowing employees to attend these sessions during work hours; and
• acting as a conduit between employer and incoming contractors, after offers of employment had been made to employees by providing letters of acceptance to the incoming contractor and allowing employees to attend induction sessions and uniform fittings.

A number of employees were successful in obtaining employment with the incoming contractors in essentially the same or similar roles. Accordingly, SSDS made an application under sections 120 and 739 of the Fair Work Act 2009 (Cth) (“FW Act”) to have the redundancy payments owed to their New South Wales/Australian Capital Territory employees reduced, arguing that as a result of its assistance many employees had obtained acceptable employment with the incoming contractors.

Section 120 of the FW Act provides:

Variation of redundancy pay for other employment or incapacity to pay

1. This section applies if:
   1. an employee is entitled to be paid an amount of redundancy pay by the employer because of section 119; and
   2. the employer:(i)  obtains other acceptable employment for the employee; or(ii)  cannot pay the amount.
2. On application by the employer, the FWC may determine that the amount of redundancy pay is reduced to a specified amount (which may be nil) that the FWC considers appropriate.
3. The amount of redundancy pay to which the employee is entitled under section 119 is the reduced amount specified in the determination.

In order for an application under section 120 to be successful, the Fair Work Commission (“FWC”) must find that outgoing employer was responsible for securing work for the employee with the incoming employer. In particular the FWC held that “there must be a causal connection between the purpose and effort of the employer and the gaining of employment or an offer of employment, by the employee”.

In his decision Commissioner Roe gave several examples of what actions may entitle an employer to an exemption to pay redundancy including:

• where the outgoing employer secures a position for its employee/employees without the need for that employee to go through a selection process;
• where the agreement made by the outgoing employer with the incoming employer causes the job offer to be made; or
• where the actions of the employer are a “strong moving force” toward the employee obtaining work with the incoming employer.

Ultimately the Commissioner Roe held he “was not satisfied that SSDS obtained suitable employment for its employees” and therefore the applications by SSDS were dismissed.

For completeness we note that Commissioner Roe did not dismiss the application made in relation to the contractor MSS and listed further a proceeding, although this proceeding has been discontinued. It should also be noted that in separate proceedings SSDS’s application for Northern Territory employees has also been dismissed while applications for Queensland are yet to be determined.