In a recent case, the Federal Court found that a contracting business was not exempt from the redundancy pay obligations under the National Employment Standards (“NES”) in the Fair Work Act 2009 (Cth) (“FW Act”).

Background

• The NES provides redundancy pay entitlements, but these are stated not to apply in circumstances where the employee’s employment is terminated due to the “ordinary and customary turnover of labour”.
• In this case, the employer conducted a contracting business that provided various services to its client, including cleaning and security services.
• In 2014, the employer lost a contract that it had held for over 20 years with a Queensland shopping centre, and as a consequence decided to terminate the employment of 21 employees.
• When the company declined to provide the affected employees with redundancy pay on the basis that the terminations were due to the “ordinary and customary turnover of labour”, the union representing the affected employees brought an action against the employer in the Federal Court seeking payment of the redundancy entitlements, among other things.

The Decision

During the proceedings, the employer claimed that it was an “ordinary and customary” practice within the Spotless Group (of which it was part of) to terminate the employment of employees in circumstances where the employing entity had lost a major contract.

The Federal Court rejected this argument on the basis that:

• the exception only applies in circumstances where termination of employment is “both common, or usual, and a matter of long-continued practice”;
• in determining whether the exception applies, a Court will have regard to the established practices of the employer in question rather than the practices within the broader Spotless Group;
• while it may have been customary for other entities in the Spotless Group to dismiss employees in circumstances where the employer lost a services contract, this was not the case for the employer; and
• the terminations and redundancies were “uncommon and extraordinary” for the employer and not a matter of long-standing practice.

In coming to this conclusion, the Court considered the long-term employment of the affected employees, some of whom had worked for the employer for 21 years, and the 20 years that it had held this specific contract. As a result, the Court ordered that the employer provide the affected employees with redundancy pay in accordance with the NES.